Bankruptcy means not having the financial resources to pay off debts.
Bankruptcy is the failure of a company or the fact that it is in ruins in terms of the economy. The etymological root of the term is found in the Italian word bancarotta , which referred to the table or bench that was used by money changers and lenders to carry out their transactions. A word that also comes from the Germanic word bank , which precisely referred to the aforementioned piece of furniture.
For example: «Despite my father's efforts, the family business eventually went bankrupt» , «I'm bankrupt! "They stole all my savings," "The mayor assured that the municipality is bankrupt and asked the provincial and national authorities for help to get ahead."
Features of bankruptcy
The concept of bankruptcy can be used in an informal or legal sense. In the first case, it is linked to an economic debacle or a bad financial moment , without having legal consequences: "Juan was fired from work and is bankrupt: we should help him," "I can't attend tonight's game ." "I'm bankrupt."
At a legal level, bankruptcy is declared when a natural or legal person does not have the assets needed to meet the required liabilities claimed. In other words: when you don't have money to pay your debts. Upon being declared bankrupt by a judge , a bankruptcy or trial is held to determine whether creditors can collect their debt from the debtor's estate.
Bankruptcy means that the bankrupt can no longer manage his or her own assets.
Cessation of payments
It is important to clarify that a cessation or interruption of payments does not imply bankruptcy. This situation is declared when the insolvency continues over time, is generalized and is objectively insurmountable for the person who has the debt .
Once bankruptcy has been declared, the person who is bankrupt can no longer manage his or her own assets and is inhibited (he or she cannot sell or encumber his or her assets).
How to get out of bankruptcy
There is no ideal path out of bankruptcy. However, economic specialists give a series of recommendations that must be followed:
- It is necessary to reduce expenses. For this, it will be necessary to analyze those that are carried out and eliminate those that are unnecessary, for example.
- When it comes to dealing with debts, you have to prioritize them. This means that the most important or those that are essential must be paid first and then the rest.
- To the extent possible, you should try to find another source of income to help get out of this bankruptcy situation.
Reorganization plan
In addition to all of the above, we have to state that there is what is known as a bankruptcy reorganization plan . This term refers to a document that attempts to plan payment to creditors in the event of insolvency.
Specifically, this document lists the creditors, the type of debt owed to each one, and a plan to meet those obligations.