A legal state that causes a natural or legal person to lose control and management of their assets, restricts their capacity, and disqualifies them from engaging in economic activities. Bankruptcy must be declared by a judge as a result of the inability of the bankrupt person to meet the debts incurred in the course of their business activities. It is a permanent state. Bankruptcy law is intended to protect the rights of creditors while providing the bankrupt person with an opportunity to reorganize their affairs and emerge from bankruptcy. In some cases, bankruptcy may result in the liquidation of the bankrupt person’s assets to pay off creditors. Bankruptcy can be voluntary or involuntary, depending on whether it is initiated by the debtor or a creditor. In addition to legal implications, bankruptcy can have significant financial and personal consequences for the bankrupt person.
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