What does bankruptcy allow individuals or businesses to do?

Bankruptcy provides a legal framework that allows individuals or businesses to eliminate or reorganize their debts. This is essential as it provides a fresh start by discharging debts that are unmanageable. For individuals, it can lead to a discharge of debts, meaning they are no longer legally responsible for repaying them, allowing them to begin rebuilding their financial situation. For businesses, it often involves reorganizing debts to continue operations, potentially working out a plan to repay creditors over time while maintaining essential functions.

This process is vital in managing financial distress because it offers protection from aggressive collection actions and allows for a structured approach to dealing with outstanding obligations. The ability to eliminate or reorganize debts through bankruptcy can enable individuals and businesses to stabilize their financial situation and work towards recovery without the immediate pressure of overwhelming debt.

In contrast, options such as transferring assets to creditors do not accurately reflect the purpose of bankruptcy, which seeks to protect the debtor's interests. Similarly, increasing revenue or liquidating all assets without restrictions does not align with the primary objective of bankruptcy, which is to provide relief and a path to financial recovery.