Bankruptcy

Loading the player...

What is 'Bankruptcy'

A legal proceeding involving a person or business that is unable to repay outstanding debts. The bankruptcy process begins with a petition filed by the debtor (most common) or on behalf of creditors (less common). All of the debtor's assets are measured and evaluated, whereupon the assets are used to repay a portion of outstanding debt. Upon the successful completion of bankruptcy proceedings, the debtor is relieved of the debt obligations incurred prior to filing for bankruptcy.

BREAKING DOWN 'Bankruptcy'

Bankruptcy offers an individual or business a chance to start fresh by forgiving debts that simply can't be paid while offering creditors a chance to obtain some measure of repayment based on what assets are available. In theory, the ability to file for bankruptcy can benefit an overall economy by giving persons and businesses another chance and providing creditors with a measure of debt repayment.

Bankruptcy filings in the United States can fall under one of several chapters of the Bankruptcy Code, such as Chapter 7 (which involves liquidation of assets), Chapter 11 (company or individual "reorganizations") and Chapter 13 (debt repayment with lowered debt covenants or payment plans). Bankruptcy filing specifications vary widely among different countries, leading to higher and lower filing rates depending on how easily a person or company can complete the process.

RELATED TERMS
  1. Chapter 13

    A U.S. bankruptcy proceeding in which the debtor undertakes a ...
  2. Bankruptcy Abuse Prevention And ...

    Legislation enacted by President George W. Bush in 2005 that ...
  3. 341 Meeting

    The meeting of creditors that occurs when an individual files ...
  4. Voluntary Bankruptcy

    A type of bankruptcy where an insolvent debtor brings the petition ...
  5. Chapter 10

    A type of corporate bankruptcy filing in the U.S. Chapter 10 ...
  6. Chapter 11

    Named after the U.S. bankruptcy code 11, Chapter 11 is a form ...
Related Articles
  1. Options & Futures

    Should You File For Bankruptcy?

    Find out how to determine whether this option will help or hurt your financial situation.
  2. Credit & Loans

    File Chapter 7 Bankruptcy

    Chapter 7 is the "liquidation" form of bankruptcy. When people file for Chapter 7, the trustee may sell some of the filer's assets to pay creditors.
  3. Bonds & Fixed Income

    An Overview Of Corporate Bankruptcy

    If a company files for bankruptcy, stockholders have the most to lose. Find out why.
  4. Entrepreneurship

    Alternatives To Business Bankruptcy

    Bankruptcy isn't the only alternative for a struggling business. It can try negotiating with creditors or liquidating assets outside the U.S courts.
  5. Investing News

    5 Energy Companies Crushed by Low Oil in 2016

    Oil companies globally are at risk of slipping into bankruptcy, and many of these businesses could disappear, leaving the sector worse off than in 2008.
  6. Investing

    The 5 Biggest Oil Bankruptcies of All Time (CVX, OGXP3.SA)

    Learn about the five largest bankruptcies in the oil industry. With oil prices in a slump and a global oversupply of oil, more bankruptcies loom on the horizon.
  7. Insurance

    Declaring Bankruptcy Is No Easy Out

    Going bankrupt can help pull you out of debt, but it's rarely the best option.
  8. Investing Basics

    3 Companies You Never Thought Would Go Bankrupt (GPRO, NFLX)

    Understand more about company bankruptcy and why a company would file for bankruptcy. Learn about three companies that went from industry leaders to bankruptcy.
  9. Credit & Loans

    What Happens When Cities Go Broke?

    In a tough economy, bankruptcy has become a dreaded - yet not uncommon - phenomenon, even for cities and municipalities.
  10. Term

    What's a Debtor?

    A debtor​ is an individual or company that owes money.
RELATED FAQS
  1. What effect did the Bankruptcy Abuse Prevention and Consumer Protection Act of 2 ...

    Credit card companies and banks hate deadbeats who take from their bottom lines. They especially dislike the Chapter 7 bankruptcy ... Read Answer >>
  2. Can personal loans be included in bankruptcy?

    Read about debts that are dischargeable when filing for bankruptcy. Learn about how personal loans are treated when filing ... Read Answer >>
  3. What happens when a corporation declares bankruptcy?

    Understand what options are available to corporations under bankruptcy protection, and learn what takes place after bankruptcy ... Read Answer >>
  4. What are the differences between chapter 7 and chapter 11 bankruptcy?

    Chapter 7 bankruptcy is sometimes also called liquidation bankruptcy. Firms experiencing this form of bankruptcy are past ... Read Answer >>
  5. What are the financial consequences of filing for bankruptcy?

    Learn about the various consequences, both positive and negative, that you can expect to result from your filing for bankruptcy. Read Answer >>
  6. What debts can I discharge when filing for bankruptcy?

    Discover which types of debt can be discharged through a Chapter 7 or a Chapter 13 bankruptcy and which debts require an ... Read Answer >>
Hot Definitions
  1. Reverse Mortgage

    A type of mortgage in which a homeowner can borrow money against the value of his or her home. No repayment of the mortgage ...
  2. Labor Market

    The labor market refers to the supply and demand for labor, in which employees provide the supply and employers the demand. ...
  3. Demand Curve

    The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity ...
  4. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  5. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  6. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
Trading Center