Bankruptcy is a daunting word. It conjures imagery most people would likely prefer to avoid if possible. A lot of the anxiety produced by discussions of bankruptcy come from a basic misunderstanding of what the process is, why it is important and how it can be used to protect your finances. One might fairly ask how going bankrupt can protect finances. The answer is that bankruptcy is not the legal term for someone with no money.
The truth is, any economic system that relies even partially on credit must have a mechanism for restoring the practical financial viability of someone who reaches a point where their debts so far exceed their assets and income they have no means to repay their debts. Bankruptcy laws are arranged into several chapters, each of which is written to address a certain set of circumstances. One of those is called Bankruptcy Chapter 7.