ABA Family Legal Guide

Forming and Operating a Small Business

Business Problems

Bankruptcy

What is bankruptcy?

Businesses and individuals typically explore the option of bankruptcy when they are having trouble paying debts when the debts become due. When this happens to a person or a business (known as the debtor), that person or business then may be entitled to file for bankruptcy under the bankruptcy laws, also known as the Bankruptcy Code. The parties to whom the debtor owes money are known as the creditors.