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. Chapter 13

    A U.S. bankruptcy proceeding in which the debtor undertakes a ...
  4. Debtor

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

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

    Named after the U.S. bankruptcy code 11, Chapter 11 is a form ...
Related Articles
  1. 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?
  2. 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.
  3. Small Business

    Taking Advantage Of Corporate Decline

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

    Should You File For Bankruptcy?

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

    How To Survive A Bankruptcy Filing

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

    Bankruptcy

    Learn what happens when an individual or an organization files for bankruptcy.
  7. 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?
  8. Small Business

    Alternatives To Business Bankruptcy

    Bankruptcy isn't the only alternative for a struggling business. It can try negotiating with creditors or liquidating assets outside the U.S courts.
  9. Taxes

    What's a Debtor?

    A debtor​ is an individual or company that owes money.
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. Taxable Income

    Taxable income is described as gross income or adjusted gross income minus any deductions, exemptions or other adjustments ...
  2. Chartered Financial Analyst - CFA

    A professional designation given by the CFA Institute (formerly AIMR) that measures the competence and integrity of financial ...
  3. Initial Coin Offering (ICO)

    An Initial Coin Offering (ICO) is an unregulated means by which funds are raised for a new cryptocurrency venture.
  4. The Bernie Madoff Story

    Bernie Madoff ran a multibillion-dollar Ponzi scheme that is considered the largest financial fraud of all time.
  5. Pyramid Scheme

    An illegal investment scam based on a hierarchical setup. New recruits make up the base of the pyramid and provide the funding, ...
  6. Ponzi Scheme

    A fraudulent investing scam promising high rates of return with little risk to investors. The Ponzi scheme generates returns ...
Trading Center