Find the best financial services for you at: SMARTFINANCESOLUTIONS.NET - What is bankruptcy, when should one file for bankruptcy? - Bankruptcy is a legally declared inability or impairment of ability of an individual or organization to pay its creditors. Creditors may file a bankruptcy petition against a business or corporate debtor (involuntary bankruptcy ) in an effort to recoup a portion of what they are owed or initiate a restructuring. In the majority of cases -