An introduction to the concept of bankruptcy

ADVERTISING DISCLOSURE

ADVERTISING DISCLOSURE:
Credit-Land.com is an independent, advertising-supported web site. Credit-Land.com receives compensation from most credit card issuers whose offers appear on our site. Compensation from our advertising partners impacts how and where their products appear on our site, including, for example, the order in which they may appear within review lists. Credit-Land.com has not reviewed all available credit card offers in the marketplace.

Credit Card Applications » Research » Guides » Building Credit History » An introduction to the concept of bankruptcy

An introduction to the concept of bankruptcy


Updated: December 26, 2012

Bankruptcy has a very common word given the present Global financial situation. Many Corporate Companies are filing for Bankruptcy following a complete drying up of funds, in an attempt to keep creditors at bay. Following the worst phase of the recession, several top corporate companies in the United States, approached the courts, or were forced to do so by their creditors. These bankrupt companies were either instructed to restructure the company or sell out to the highest bidder available.

Bankruptcy is a court ordered status issued to a company following complaints filed by creditors. A company is considered bankrupt when it can locate the funds, through revenue to pay back its creditors.

Most often, Companies that are unable to meet the demands o other creditors are taken to court by the creditors themselves. A company can also approach a court on its own accord to file for bankruptcy. The Court after establishing that a company is bankrupt can do one of two things: it can either disband the company or ask it to sell its shares and stocks to the highest bidder available or it can ask the company to restructure its working. The final decision taken by the court is based on the reasons it understands to be the cause of the Bankruptcy. In some cases, a poor management of funds and finance policies over time lead to a company's bankrupt state. In other cases, a complete meltdown of a company's market value overnight can lead to disaster. It was the latter that pushed several successful companies to bankruptcy during the recession.

The company has to, under any circumstances; follow the orders of the court. The creditors are then given some reprieve by the court in terms of remuneration. The company, if selling out, will sell out at a price with which it can pay back its creditors. At times the company that buys a bankrupt company may choose to retain the arrangement of share holders and creditors, if the creditors and shareholders are willing to do so.

Some companies attempt to mask the real state of their accounts from their creditors. They do so by releasing false statements of expenditure versus profit. Companies may be tempted to engage in such activity fearing a court ordered disbanding or break down of the company. This is considered bankruptcy fraud. When the creditors' suspect that a company is running hugs losses, they may decide to take the company to court. Under these circumstances a court of law will penalize the company for attempt to cheat its creditors and the legal framework of the country.

Disclaimer: This editorial content is not provided or commissioned by the credit card issuer(s). Opinions expressed here are the author's alone, not those of the credit card issuer(s), and have not been reviewed, approved or otherwise endorsed by the credit card issuer(s). Reasonable efforts are made to present accurate information, however all information is presented without warranty. Consult a card's issuing bank for the terms & conditions.
All rates and fees, and other terms and conditions of the products mentioned in this article/post are actual as of the last update date but are subject to change. See the current products' Terms & Conditions on the issuing banks' websites.
Add to Favorites:
Get the latest news, articles and expert advice delivered to your inbox. It's FREE.

Related Research:

Top 5 Cards for Travel from Our Partners: Spring 2018 – Expert Choice

Top 5 Cards for Travel from Our Partners: Spring 2018 – Expert Choice

Posted: February 12, 2018

Days are getting longer, snow is melting and you already feel the lightest breath of warm breeze on your face - spring is here. Summer holidays are looming, and so is Easter with its shopping. You can lift in spirits and let CreditLand ... Continue reading
Cash Back or Travel Rewards? Here’s How to Decide On The Right Card

Cash Back or Travel Rewards? Here’s How to Decide On The Right Card

Posted: February 10, 2018

If you're trying to find the perfect rewards credit card, you might feel like you're drowning in options. There are just so many out there, and many of them look similar. This can make it tough to decide on a card. One thing people often ... Continue reading
Price Protection: Credit Cards That Will Refund a Price Drop

Price Protection: Credit Cards That Will Refund a Price Drop

Posted: February 8, 2018

Those who often find themselves buying stuff and then discovering that they could pay less for the same item they've just bought, will appreciate this credit card benefit – price protection. This is the least known and the most neglected ... Continue reading
You've successfully subscribed!

Please specify the following:All these fields are optional

Your Credit History
Themes you are interested in:

By providing this information you help us make our news letters more useful and informative. Thank you!