In banking, what does bankruptcy refer to?

Bankruptcy refers to a legal process designed for individuals or businesses that find themselves unable to repay their outstanding debts. This process provides a way for the debtor to seek relief and possibly reorganize their financial situation, often allowing them to clear or reduce some of their debts under the protection of the bankruptcy court.

When declaring bankruptcy, individuals or businesses can gain a fresh start financially, as the legal proceedings may involve the discharge of certain debts, which means they can be released from the obligation to pay those debts. This legal framework is important in the financial system, as it provides a structured approach to handling insolvency while safeguarding the rights of creditors.

The other options do not accurately reflect the concept of bankruptcy. Strategies for increasing profit margins, securing loans, or providing investment plans do not connect with the core purpose and definition of bankruptcy, which is fundamentally about addressing insolvency and managing debt relief.