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.

BREAKING DOWN '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.

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RELATED FAQS
  1. What are the differences between Chapter 11 and Chapter 13 bankruptcy?

    Discover the differences, including respective advantages and disadvantages, between Chapter 11 bankruptcy and Chapter 13 ... Read Answer >>
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