An introduction to the concept of bankruptcy

Advertising Disclosure

Credit-Land.com is an independent, advertising-supported web site. Credit-Land.com receives compensation from many 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

Add to Favorites:

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.

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 Autumn 2017 – Expert Choice

Top 5 Cards for Travel from Our Partners Autumn 2017 – Expert Choice

Posted: November 8, 2017

Nights are drawing out, the wind is colder every day and you already feel the lightest breath of winter on your face - autumn is here. Holidays are over, kids are back to school and all you are left with are hefty holiday bills that you ... Continue reading
Autumn 2017: Best Rewards Credit Cards for Thanksgiving Shopping

Autumn 2017: Best Rewards Credit Cards for Thanksgiving Shopping

Posted: November 2, 2017

Thanksgiving is coming, and whether you are hosting a meal or coming as a guest, your spendings are going to accumulate faster than you can notice. A holiday feast is a costly matter – each year Americans spend around $50 on a Thanksgiving ... Continue reading
Balance Transfers Within The Same Bank: What You Need To Know

Balance Transfers Within The Same Bank: What You Need To Know

Posted: November 2, 2017

Transferring a credit card balance from a high-APR card to a card with a zero-interest promotional rate is one of the best ways to pay down debt. But many people have questions about how to do it. Specifically, some folks wonder whether ... Continue reading