The term bankruptcy is used to define a legal state where a company, institution or natural person cannot meet its liabilities, since these are greater than its available assets. This term comes from the Italian " banca rotta", which literally means "broken bank" alluding to the ancient Italian custom of breaking the chairs of those lenders who were in financial crisis.
A natural or legal person that is in bankruptcy is called bankrupt. When the bankrupt or deficit is judicially declared bankrupt, we proceed to examine whether the debtor has the ability to meet his assets, the outstanding payment debts.
Bankruptcy is characterized by: a constant state of insolvency over time, insolvency so great that it is insolvent, generalized insolvency, other than suspension of payments.
In countries like the United States, the bankruptcy process agrees to modify your liabilities, without having to replace your management team; the clarity of the process makes it possible to save on paperwork in court, since the terms of the reorganization can be agreed with the creditors. In the other countries, the bankruptcy situation can have much more adverse consequences for the debtor, this will depend on the laws of each country, which could include the suspension of legal personality, including criminal punishment.
The most common causes that can lead a company or natural person to bankruptcy can be: bad investments, wrong business decisions, waste of profits, not having invested at the right times, terrible business management, lack of planning, among many others..
Among the consequences that it implies for a natural or legal person to declare bankruptcy are: the debtor is unable to handle their assets, the administration of them will be in charge of a judicial inspector who will be in charge of liquidating these assets in due course. in order to cancel the creditors.
Outstanding term debts become due and quickly due. Creditors cannot specifically execute the debtor. The debtor is given the right to request maintenance from the group of creditors.
