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Simple English definitions for legal terms
voluntary bankruptcy
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A quick definition of voluntary bankruptcy:
Voluntary bankruptcy is when someone who owes a lot of money decides to ask the court for help. They start the process themselves by filing paperwork. This is different from involuntary bankruptcy, which is when the people or companies who are owed money ask the court to step in and help.
A more thorough explanation:
Voluntary bankruptcy
Voluntary bankruptcy is when a person or business decides to file for bankruptcy on their own. This means they are the ones who start the process, rather than their creditors.
1. John has been struggling to pay off his debts for a while now. He decides to file for voluntary bankruptcy to get a fresh start and eliminate his debts.
2. Sarah owns a small business that has been losing money for months. She decides to file for voluntary bankruptcy to avoid being sued by her creditors.
These examples illustrate voluntary bankruptcy because in both cases, the individuals made the decision to file for bankruptcy on their own. They were not forced into it by their creditors. By filing for voluntary bankruptcy, they are able to eliminate their debts and start fresh.