Bankruptcy is a federal court process designed to help consumers and businesses eliminate their debts or repay them under the protection of the bankruptcy court. Bankruptcies can generally be described as "liquidation" or "reorganization."
Under a liquidation bankruptcy (Chapter 7), you ask the bankruptcy court to wipe out (discharge) the debts you owe. Under a reorganization bankruptcy (typically Chapter 13, for consumers), you file a plan with the bankruptcy court proposing how you will repay your creditors. You must repay some debts in full; others may be repaid only partially or not at all, depending on what you can afford.