Bankruptcy is the last resort process for dealing with the insolvency (inability to pay debts) of an individual. If a company becomes insolvent, it can be put into liquidation, a process which leads to it ceasing to exist. As this is generally considered too drastic a sanction to apply to people, they are made bankrupt.
An individual is declared bankrupt by a court, either on their own request, or at the request of their creditors, or at the request of the supervisor of an individual voluntary arrangement made with creditors.
After a period in which the bankrupt individuals assets and income are controlled by a court appointed trustee in bankruptcy. After this period the bankrupt person will be declared discharged and get a fresh start. However a person who the court believes has been reckless of dishonest may have various restriction imposed on bankrupts imposed for many years after discharge.