Bankruptcy is a term given to inability of an individual or organization to repay or entertain the debts owed to different parties i.e. creditors. Bankruptcy can be involuntary when the creditors push the borrower or the company in question to either repay the owing or declare bankruptcy so that assets are utilized to pay the bills. It could, however, also be voluntary when company or individual, itself accepts its inability and declares bankruptcy so that debt is repaid by asset liquidation.

Bankruptcy has a history that dates back to ancient time though the overall treatment and procedure has evolved as the time passed. Sometimes it is rational to declare bankruptcy, despite its many nightmares. The prudent question then is, how to do it in such a way that minimum harm is done to the bankrupt and the parties concerned.

In the UK, the term bankruptcy is only used for insolvency of individuals or companies and not large corporations. The legal term is different for corporations because their treatment is different from smaller enterprises. Bankruptcy laws in UK have recently been changed and liberalized. At the same time, these have become stricter. UK bankruptcy law through Enterprise Act 2002 has tried to ease the difficulties of genuine bankruptcies by shortening the period of discharging a bankruptcy from 2-3 years to 12 months. This means that an individual or company involved can get the matters solved in 12 months and start a new life with a fresh approach once again. Previously, companies used to loose their credibility as well along with bankruptcy by the time they came out of insolvency procedures. Thus, the laws have made life easier for the potential genuine bankrupts.

However, the stricter laws imply that if bankruptcy has taken place due to inefficiency of the owner or individual, then there is going to be a serious action taken against the party for breach of law. Criminal bankruptcy is another issue in question. Companies usually indulges in fraudulent acts to expedite bankruptcies to free themselves from indebtedness; by not disclosing the true representation of the assets, by misrepresenting the important documents, by creation of documents to file a bankruptcy at their own ease and fixing fees to expedite the procedure of insolvency, which eventually harms the creditors.

Bankruptcy, however, makes life a living hell and there is no doubt about the phenomenon. This is because your credibility and reputation in the society ruins and so does your future prospect of employment. Once employed, this could hamper or hinder the promotional prospects in a company. Moreover, if a person intends to borrow more in future, even for personal reasons and having the ability to pay the bills would be subject to scrutiny on the basis of bankruptcy records that have accumulated to his name.

Therefore, once bankrupt, individual has to be very cautious in terms of living habits. Certain steps could help a bankrupt to revive the lost credibility and form platform for a fresh start. After bankruptcy, it is advisable to seek advice from an empathetic relative, and then the consumption habits need to be in line with purchasing power so that excess funds are not required giving way to debt, try getting a job as soon as possible, learn to insure reserves for future usage and emergencies, Learn financial concepts in order to know the reasons behind the previous bankruptcy and the try avoiding such circumstances.