Concept in Definition ABC

Commercial bankruptcy of a company, a business or the economy of a natural person

The concept of bankruptcy is widely used economically to indicate the commercial bankruptcy of a company, a business or that of the economy of a natural person.

Cannot meet expected payments

This situation is basically characterized because the company or the person affected by this state does not can face the expected payments, either to suppliers or their employees, because they do not have the economic resources enough to do so, that is, the debts and payments to be canceled are much more onerous than the money available.

Bankruptcy procedure for creditors to collect

Once a person or a company has declared bankruptcy, the situation will be prosecuted for decide whether or not it can face the debts with its heritage.

In the bankruptcy or contest procedure, a judge will examine the situation and appoint a administration who will have the responsibility to find one solution for creditors, that is, that everyone can collect their money in the shortest possible time. In the cases that are viable, the judge and the administration will order to execute the assets of the company or the person in question to be able to face the payments.

Bankruptcy is decreed when the assets of the person or business are not enough to cover the debts incurred

Now, we must emphasize that bankruptcy is decreed when the assets of the person or business are not enough to cover the debts incurred.

There are two ways to solve this situation, that the creditors reach an agreement and accept a reduction of the value to be collected to be able to do so as soon as possible, or that the assets available to pay are executed, even if they do not cover the amount owed.

Causes of bankruptcy

There are many causes that can lead a person or a company to bankruptcy, bad business decisions, a business that was unsuccessful, investments that did not arrive, wasting profits and not having invested them in a timely manner, among so many others.

The damage and desolation caused by this state of affairs

It is important to mention that the fall into this bankruptcy situation will always generate a lot of damage and desolation in all the parts that suffer from it. The businessman will be desperate because his business collapsed and it is also possible that he will have to hand over part of his assets to be able to respond to the aforementioned contest. And on the other hand, employees and creditors will also go through a situation financial serious because they will not be able to collect in time and form the money that they had planned will enter on this or that date.

We must also emphasize that this context is often called bankruptcy.