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
  1. Quick-Rinse Bankruptcy

    A bankruptcy proceeding that is structured to move through legal ...
  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. Default Risk

    The event in which companies or individuals will be unable to ...
  5. Debtor-In-Possession Financing ...

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

    A legal proceeding involving a person or business that is unable ...
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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. Is my IRA protected in a bankruptcy?

    All types of individual retirement accounts, or IRAs, recognized under the federal tax code enjoy substantial protection ... Read Full Answer >>
  3. How can I take a loan from my 401(k)?

    The majority of employers offer eligible employees the opportunity to save for retirement in a qualified plan through paycheck ... Read Full Answer >>
  4. How do I avoid a tax lien on my property?

    The best way to avoid a tax lien on your property is to make sure you pay all your state, municipal and federal taxes in ... Read Full Answer >>
  5. 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 >>
  6. What is the difference between a possessory and a non-possessory lien?

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