Bankruptcy is a process that relieves a person or business of certain debts. This occurs when a person or business cannot pay their outstanding debts. There are many types of bankruptcy, and it’s important to understand the pros and cons of bankruptcy if someone cannot pay their outstanding debts. If you file for bankruptcy, you will likely lower your credit rating – making it more difficult to get a loan, mortgage, or credit card, or to buy a home or business, or rent an apartment.