Bankruptcy is a state where the debtor is not in a position to re-pay the debts owned. This situationcould happen to both individuals and organizations. Though bankruptcy is something that people wouldnot be willing to accept or disclose- they are forced to do so when there are no other options left.Usually financial concerns that give advice on debt related issues consider bankruptcy to be the lastresort as that could have a lot of implications on the credit score and might get very difficult to build itfrom scratch.
Bankruptcy can be of two types- Voluntary and Involuntary. Voluntary bankruptcy is the one where thedebtor either an individual or the firm comes forward and declares their financial status. Involuntary bankruptcy happens when the creditors file lawsuits against firms to collect the credit amounts. This can happen only when there is a firm involved and does not apply for individuals. There are many ways the situation is handled when an organization or an individual declares bankruptcy. This could some times lead to partnership or takeover of firms by third party companies that work on restructuring the financial state of the concern. In such cases, the creditors get to make a list of all the types of assets involved irrespective of the value and then there are usually a set of trustees involved who take up the responsibility of disposing the assets and use the funds to take care of the credits. In case of individuals,there are options to dispose immovable asset, increase in tenure for repayment options.
More thanthe financial state, it is the mental stress that many find difficulty in handling when going through bankruptcy. The laws of bankruptcy differ from one country to another- in some places where they allow a certain amount to be waived- in a few others there are only options to increase the repaymentperiod or reduced interest depending on the situation.
