A bankrupt firm is one that is unable on a nontemporary basis to meet its current debt obligations. In many countries, the bankrupt firm enters a formal procedure that bankruptcy law controls. Corporate bankruptcy law differs across countries, as do the problems attached to it.
In most countries, bankruptcy law permits a firm or their creditors to either liquidate or reorganize the firm. Some bankruptcy codes, for instance, in the United States and in Sweden, provide a separate procedure in bankruptcy for liquidation and reorganization. In other jurisdictions, for example, Germany, there is a single procedure. This entry focuses on those three countries because the laws are quite different and we have empirical evidence about the bankruptcy process.
U.S. Bankruptcy Law
According to the U.S. bankruptcy code, ...