Defining Bankruptcy
Bankruptcy of a person or a firm is commonly described as the firm's or an individual's inability to oblige their payments owed to a creditor because of lack of financial funds or property. When an individual or a firm due to lack of funds is not able to clear off their financial credits then a state of insolvency is created, and the person or the firm is treated as Bankrupt financially. Though bankruptcy is of number of types but the most common amongst all is financial bankruptcy as mainly all business firms normally file for their financial bankruptcy in courts.
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Types of Bankruptcies
Bankruptcies are of number of types, still in practice there are 6 important bankruptcies which occur due to different situations. The most common is Financial Bankruptcy which includes the dissolution of a firm when their financial funds run out. Medical Bankruptcy occurs when a person's financial condition worsens because of sever e disease which is being operated. Reorganization has its greater importance in investment banking sector as it allows a business firm to reorganize itself by not completely dissolving itself, else giving a chance to rebuild itself. Sometimes the individual property of a firm or a person is sold out by the court officials, to get the money of their debt and a portion of it is being kept away from it and is given back to property holder. When there are international investments, sometimes the foreign investors are unable to clear off their debts in the foreign nation which issued them credit.
Bankruptcy related to Person
When an individual is unable to clear off its debt to a creditor, is referred as Bankruptcy related to a person. When an individual file its bankruptcy in court he is given many ways to get rid of his debts. In one situation the person is asked to maintain its property as it is not being sold away by the court, in that case the person's current assets are being used. It is like cash in hand or any other valuable item which is redeemable at any time when required. In some situations the individuals is asked to pay his debts in installments in a period of some years, with regular installments of certain amount which is judged either by the debtor or the creditors.
Bankruptcy of a business firm
In case of small scale companies and large scale companies, bankruptcy in mainly large scale firms occurs. In small scale bankruptcy seldom occurs. When a firm is not able to pay its debt and other financial needs due to lack of it, it files for bankruptcy in related court. It is also being carried in the same way as the individual bankruptcy is carried but in normally involves involvement of top level attorneys in this execution. Acquiring Liquid assets is the best way for the court to get the money of creditors.
Filing Bankruptcy
When a person or a firm thinks that they are in financial crisis, they go out for filing bankruptcy in related court, which is a legal way to declare them as bankrupt.
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