What legal process allows a person to get out of debt when they can no longer make all required payments?

• A. Bankruptcy
• B. Default
• C. Debt consolidation
• D. Deferrment

Answer: (A)

Bankruptcy is the legal process that provides relief when someone can no longer meet their debt payments. By filing, most or all unsecured debts can be discharged or reorganized under court supervision, offering a path to fresh start. An automatic stay also kicks in, stopping most collection actions while the process is underway. Different routes within bankruptcy include Chapter 7, which often wipes out many debts after liquidating non-exempt assets, and Chapter 13, which creates a court-approved repayment plan over several years.

Default means simply failing to pay on time; it doesn’t erase debt and can lead to penalties and collections. Debt consolidation blends multiple debts into one loan but doesn’t eliminate what’s owed. Deferment postpones payments for a period but doesn’t discharge the debt.