How does bankruptcy affect a person?

Answer 1

Bankruptcy means a legal person (which may be a company) can not meet their debts. This means that Banks are likely to be creditors and that while they do get "first call" on any assets, there is a likelihood that they will not recover all the money they have lent to the legal person. This means the banks could lose money. However they factor this possibility in to all their lending and make overall charges to cover such an eventuality. They also make sure that before they lend, to a company they have a good Idea that the company is "sound".

Answer 2

The debtors is th one who files BK. Basically, it's pretty simple: all of their assets are used to pay off all of their debts. If they don't have enough assets to pay all the debts, the excess debt may be dismissed by the court. Some debts (which are whata debtors owes creditors), may be paid in full and some only in part. If the debt is secured by a specific item, say a car or house, the money from the sale of that item will go firt to that specific creditor. Some assets (like certain retirement accounts, workers tools, kitchen set, very personal things) as well as certain debts (like student loans, court judgements, child support) are not included in the BK process.

Answer 3

Bankruptcy raises creditors expenses because people get out of paying what they owe. It causes the price of everything to go up because of those who don't or can't pay their debts.