Bankruptcy Financing

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DEFINITION of 'Bankruptcy Financing'

Financing arranged by a company while under the chapter 11 bankruptcy process. Clearly, such financing is extremely high risk and is done at a relatively high interest rate.

INVESTOPEDIA EXPLAINS 'Bankruptcy Financing'

Sometimes referred to as "turnaround financing" or "debtor in possession financing". It can be very profitable to lend to companies that need money this badly, but at the same time, a lender runs a high risk of the creditor defaulting.

RELATED TERMS
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  2. Chapter 11

    Named after the U.S. bankruptcy code 11, Chapter 11 is a form ...
  3. Moratorium

    1) A period of time in which there is a suspension of a specific ...
  4. Bankruptcy

    A legal proceeding involving a person or business that is unable ...
  5. Debtor-In-Possession Financing ...

    Financing arranged by a company while under the Chapter 11 bankruptcy ...
  6. Default Risk

    The event in which companies or individuals will be unable to ...
RELATED FAQS
  1. 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 Full Answer >>
  2. What is the best way to start to rebuild your credit after a bankruptcy?

    Bankruptcies can be devastating to your credit score. Even worse, a bankruptcy will be listed on your credit report for between ... Read Full Answer >>
  3. What is the difference between a possessory and a non-possessory lien?

  4. Why is more interest paid over the life of a loan when it is capitalized?

    More interest is paid over the life of a loan when that interest is capitalized because the capitalized interest is added ... Read Full Answer >>
  5. What are the differences between Chapter 7 and Chapter 13 bankruptcy?

    In the United States, the most common kinds of personal bankruptcy filings are under Chapter 7 or Chapter 13 proceedings. ... Read Full Answer >>
  6. What are the financial consequences of filing for bankruptcy?

    The financial consequences of filing for bankruptcy are substantial and can be long-lasting. They include impacts on your ... Read Full Answer >>
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