Bankruptcy

AAA

DEFINITION of '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.

INVESTOPEDIA EXPLAINS '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. Official Committee Of Equity Security ...

    A small group of the largest shareholders in a company formed ...
  2. Delinquent

    The failure to accomplish what is required by law or duty, such ...
  3. Discharge In Bankruptcy

    A permanent order that releases the debtor from personal liability ...
  4. Senior Debt

    Borrowed money that a company must repay first if it goes out ...
  5. Chapter 13

    A U.S. bankruptcy proceeding in which the debtor undertakes a ...
  6. Absolute Priority

    A rule that stipulates the order of payment - creditors before ...
Related Articles
  1. Credit & Loans

    What are some signs that I need debt / credit counseling?

    Stop stressing about debt and bills and avoiding phone calls from debt collectors. Get help from a debt and credit counselor today.
  2. Credit & Loans

    Fighting Back Against Collection Lawsuits

    There are still options available to those being pursued by a creditor.
  3. Retirement

    Bankruptcy Protection For Your Accounts

    Will the plan assets you've worked hard for be safe if you experience a personal financial crisis?
  4. Credit & Loans

    A Lifeline For Those Drowning In Debt

    Don't wait to be saved, find out where the lifesaving devices are and hang on tight!
  5. Credit & Loans

    How To Survive A Bankruptcy Filing

    Learn how to make filing for bankruptcy less painful so you can successfully rebuild your financial life.
  6. Credit & Loans

    Prevent Bankruptcy With These Tips

    This financial decision should only be used as a last resort. Find out how to avoid it.
  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. Bonds & Fixed Income

    An Overview Of Corporate Bankruptcy

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

    What is the history behind today's bankruptcy laws?

    Julius Caesar was emperor of Rome for a scant five months, but in that short time he changed the course of financial history. A lifelong debtor himself, Julius Caesar gave the world bankruptcy ...
  10. Retirement

    What You Need To Know About Bankruptcy

    Don't choose this last-resort option until you learn how it will affect your future.

You May Also Like

Hot Definitions
  1. Scarcity

    The basic economic problem that arises because people have unlimited wants but resources are limited. Because of scarcity, ...
  2. Trust Fund

    A trust fund is a fund comprised of a variety of assets intended to provide benefits to an individual or organization. The ...
  3. Christmas Tree

    An options trading strategy that is generally achieved by purchasing one call option and selling two other call options at ...
  4. Christmas Club

    A short-term savings account that usually pays out the full account balance to its account holders once each year, right ...
  5. Boston Snow Indicator

    A market theory that states that a white Christmas in Boston will result in rising stock prices for the following year. For ...
  6. Christmas Island Dollar

    The former currency of Christmas Island, an Australian island in the Indian Ocean that was discovered on December 25, 1643. ...
Trading Center