What does "bankruptcy" mean?

There seems to be some confusion and concern about the impacts of bankruptcy. Cornell University's School of Law provides an overview on its website:

Bankruptcy law provides for the development of a plan that allows a debtor, who is unable to pay his creditors, to resolve his debts through the division of his assets among his creditors. This supervised division also allows the interests of all creditors to be treated with some measure of equality. Certain bankruptcy proceedings allow a debtor to stay in business and use revenue generated to resolve his or her debts. An additional purpose of bankruptcy law is to allow certain debtors to free themselves (to be discharged) of the financial obligations they have accumulated, after their assets are distributed, even if their debts have not been paid in full.

I understand that different kinds of bankruptcy procedures may lead to different kinds of outcomes. Bankruptcy is being discussed in terms people defaulting on their home mortgages, the big three American automakers, and many commerclal firms caught by the current financial crisis. We, the poor voters must form opinions of the impacts of bankruptcy in these very different circumstances, and may be applying the same word to different processes.