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 who is in a bankruptcy situation is called bankrupt. When the bankrupt or deficit is judicially declared bankrupt, it proceeds to examine whether the debtor has the capacity to meet his assets, outstanding payment debts.

Bankruptcy is characterized by: a state of constant insolvency over time, insolvency so large as to be insurmountable, generalized insolvency, other than suspension of payments.

In countries like the United States, the bankruptcy process agrees to modify their liabilities, without having to replace their management team; the clarity of the process makes it possible to save paperwork in court, since the terms of the reorganization can be agreed with the creditors. In 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, poor business management, lack of planning, among many others. .

Among the consequences that imply for a natural or legal person to declare bankruptcy are: the debtor is unable to manage their assets, the administration of the same will be in charge of a judicial intervening entity who will be in charge, at the time, of liquidating these assets. in order to pay off creditors.

Outstanding term debts become due and quickly payable. Creditors cannot execute the debtor in a particular way. The debtor is granted the right to request maintenance from the group of creditors.