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.

RELATED TERMS
  1. Chapter 11

    Named after the U.S. bankruptcy code 11, Chapter 11 is a form ...
  2. Chapter 13

    A U.S. bankruptcy proceeding in which the debtor undertakes a ...
  3. Chapter 7

    A bankruptcy proceeding in which a company stops all operations ...
  4. Bankruptcy

    A legal proceeding involving a person or business that is unable ...
  5. Bankruptcy Abuse Prevention And ...

    Legislation enacted by President George W. Bush in 2005 that ...
  6. Debtor In Possession - DIP

    An individual or corporation that has filed for Chapter 11 bankruptcy ...
Related Articles
  1. Taxes

    Changing The Face Of Bankruptcy

    A 2005 law attempts to unmask fraudulent debtors and still save those who are struggling. Will it affect you?
  2. Financial Advisor

    An Overview Of Corporate Bankruptcy

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

    How To Survive A Bankruptcy Filing

    Learn how to make filing for bankruptcy less painful so you can successfully rebuild your financial life.
  4. Taxes

    When To Declare Bankruptcy

    When is bankruptcy the best or only route– and when is it better to look at alternative solutions? And should you always hire a lawyer?
  5. Small Business

    What is Equity Financing?

    Companies that are short on cash may need financing to pay for short-term needs or long-term capital expenditures.
  6. Taxes

    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.
  7. Small Business

    Mezzanine Financing

    Learn about this alternative method of financing companies use to finance expansion.
  8. Investing

    What Does Finance Cover?

    Finance is the study of banking, leverage, credit, capital markets, money and investments, along with how they are used by individuals and companies.
  9. Small Business

    Chapter 11 Bankruptcy: Is It Better To Be a Stockholder or Bondholder? (BTU)

    Discover why energy companies are struggling to stay solvent, while examining the basics of Chapter 11 bankruptcy and its effect on stock and bond holders.
  10. Small Business

    Is Equity Financing the Right Choice for Your Business?

    Discover the benefits and drawbacks of equity financing for a small business, and learn when equity financing should be used instead of debt financing.
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 >>
  2. 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 >>
  3. Does a shareholder lose all of their equity once a Chapter 11 bankruptcy is filed ...

    When a company files for Chapter 11 bankruptcy, the management of the company is still in charge of the daily operations. ... Read Answer >>
  4. 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 >>
  5. What are the benefits for a company using equity financing vs. debt financing?

    Learn what some of the principal advantages are for a company that chooses to utilize equity financing in preference to debt ... Read Answer >>
  6. What happens to the shares of a company that has been liquidated?

    Learn what happens to a company's shares during Chapter 11 and Chapter 7 bankruptcy proceedings, and understand how much ... Read Answer >>
Hot Definitions
  1. Restricted Stock Unit

    Compensation offered by an employer to an employee in the form of company stock. The employee does not receive the stock ...
  2. Operating Ratio

    A ratio that shows the efficiency of a company's management by comparing operating expense to net sales. Calculated as:
  3. Expense Ratio

    A measure of what it costs an investment company to operate a mutual fund. An expense ratio is determined through an annual ...
  4. Pro Forma

    A Latin term meaning "for the sake of form". In the investing world, it describes a method of calculating financial results ...
  5. Trumpcare

    The American Health Care Act, also known as Trumpcare and Ryancare, is the Republican proposal to replace Obamacare.
  6. Free Carrier - FCA

    A trade term requiring the seller to deliver goods to a named airport, terminal, or other place where the carrier operates. ...
Trading Center