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Bankruptcy is a legal process which happens when a person or an organization does not have enough money to pay all of its debts. Legally they are insolvent.

Where it is a person who cannot pay their debts, the person's creditors may ask the court to appoint a trustee in bankruptcy. This is a professional accountant who is appointed by the court, to take control of the bankrupt person's assets. Some assets are protected by law, but the trustee in bankruptcy will sell off all of the other assets and use the money to pay as much of that person's debts as possible. After the process is complete the person is discharged from bankruptcy, and the person is free from any further liability to pay those claims, but normally that person will be limited in their ability to borrow money again because their credit rating will be damaged.