Pub. date: 2008 | Online Pub. Date: May 28, 2008 | DOI: 10.4135/9781412963930 | Print ISBN: 9781412941655 | Online ISBN: 9781412963930| Publisher:SAGE Publications, Inc.About this encyclopedia
Business bankruptcy occurs when a commercial organization does not have sufficient readily available funds (capital) to pay its current debts. Further, the business is either unable or unwilling to sell its assets, or to use debt (by borrowing capital) or equity (by selling ownership shares), to pay such obligations. As a result, the owner(s) declare(s) the business to be bankrupt. This declaration in most developed countries invokes laws and procedures designed to protect the interests of both the owner(s) and the creditor(s) in an orderly fashion. In the United States, the declaration and resolution of a business bankruptcy is most often governed by the provisions of Chapter 11 of Title 11 of the U.S. Commercial Code. Hence, although a business may also file under the provisions of Chapter 7 or Chapter 13, reference is usually made to a business being “in Chapter 11.” Business bankruptcies are a fact of the ...