DEFINITION of 'Voluntary Bankruptcy'

A type of bankruptcy where an insolvent debtor brings the petition to a court to declare bankruptcy because he or she (in the case of an individual) or it (in the case of a business entity) is unable to pay off debts. The bankruptcy is intended to create an orderly and equitable settlement of the debtor's obligations.

BREAKING DOWN 'Voluntary Bankruptcy'

Voluntary bankruptcy is a bankruptcy proceeding initiated by a debtor who knows that they will not be able to satisfy the debt requirements of creditors. Voluntary bankruptcy is typically commenced when and if a debtor finds no other solution to the financial situation. Voluntary bankruptcy differs from involuntary bankruptcy which occurs when one or more creditors petitions a court to judge the debtor as insolvent (unable to pay).

RELATED TERMS
  1. Involuntary Bankruptcy

    A legal proceeding in which a person or business is requested ...
  2. 341 Meeting

    The meeting of creditors that occurs when an individual files ...
  3. Debtor

    A company or individual who owes money. If the debt is in the ...
  4. Debtor In Possession - DIP

    An individual or corporation that has filed for Chapter 11 bankruptcy ...
  5. Chapter 11

    Named after the U.S. bankruptcy code 11, Chapter 11 is a form ...
  6. Reaffirmation

    An agreement made between a debtor and a creditor to repay some ...
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. 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?
  3. Taxes

    5 Myths About Personal Bankruptcy

    There are some persistent myths that hover over the process of bankruptcy that are either half-truths or completely false.
  4. Small Business

    Taking Advantage Of Corporate Decline

    A bankrupt company can provide great opportunities for savvy investors.
  5. Financial Advisor

    Should You File For Bankruptcy?

    Find out how to determine whether this option will help or hurt your financial situation.
  6. Taxes

    How To Survive A Bankruptcy Filing

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

    Bankruptcy

    Learn what happens when an individual or an organization files for bankruptcy.
  8. Taxes

    How To Survive Bankruptcy

    Bankruptcy is not the end of the world. You can survive it and come out on the other side more financially solid.
  9. Financial Advisor

    Bankruptcy Protection For Your Accounts

    Will the plan assets you've worked hard for be safe if you experience a personal financial crisis?
  10. Taxes

    How to Hire a Bankruptcy Lawyer

    How do you find the right bankruptcy lawyer? What you should look for to determine the right attorney for you.
RELATED FAQS
  1. What effect did the Bankruptcy Abuse Prevention and Consumer Protection Act of 2 ...

    Credit card companies and banks hate deadbeats who take from their bottom lines. They especially dislike the Chapter 7 bankruptcy ... Read Answer >>
  2. 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 >>
  3. How do I get information about my bankruptcy case?

    Learn about different places to search when seeking information about an individual's bankruptcy. Learn about Public Access ... Read Answer >>
Hot Definitions
  1. Gross Margin

    A company's total sales revenue minus its cost of goods sold, divided by the total sales revenue, expressed as a percentage. ...
  2. Current Ratio

    The current ratio is a liquidity ratio measuring a company's ability to pay short-term and long-term obligations, also known ...
  3. SEC Form 13F

    A filing with the Securities and Exchange Commission (SEC), also known as the Information Required of Institutional Investment ...
  4. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
  5. Risk Averse

    A description of an investor who, when faced with two investments with a similar expected return (but different risks), will ...
  6. Indirect Tax

    A tax that increases the price of a good so that consumers are actually paying the tax by paying more for the products. An ...
Trading Center