What is Bankruptcy in economics definition and its Examples


When talking about bankruptcy in economics  , reference is made to a legal situation, through which it is sought that a natural or legal person can solve through their possibilities those debts kept to a plurality of creditors.

Therefore, for a bankruptcy to happen, it is necessary that the insolvency of a debtor occurs due to the impossibility of satisfying its obligations, which leads to a default derived from the imbalance between its assets and liabilities compared to its productive capacity.

Which leads to a legal system with which the creditor bankruptcy system allows the debt repair to be initiated through the debtor’s assets, managing this among his creditors based on the priorities and priorities of credits established by law. .

That is to say, the debtor is obliged to respond to said debt with all of his assets, always excepting all those that according to the law are unattachable.

In relation to this, it is valid to ask which credits are privileged ?, which has as an answer all those tax, mortgage, specific, pledge, labor, etc. credits.

It can be promoted according to two modalities, the voluntary bankruptcy modality or the necessary bankruptcy modality.

Through the voluntary bankruptcy, the debtor by his own decision can choose to dispose of his assets, in order to settle the accumulated debt with his creditors, having to present in writing the status of all those assets and liabilities with which he accounts, accompanied by the corresponding documentation requested.

It is important to note that assets that cannot be seized will not be taken into account for assets.

On the other hand, through the necessary bankruptcy, the creditors will be those who promote it , presenting the corresponding documentation in which the deadlines met for the payment of credits are recorded, proceeding to sue the debtor’s assets.

Examples of bankruptcy

  1. Through the bankruptcy it is possible, voluntarily or necessarily, to settle the account of a debtor to his creditors through the seizure of assets.
  2. To settle the debts of a natural or legal person through a lawsuit process, their assets would be confiscated, except for all those that by law are unattachable.
  3. Through the bankruptcy of creditors, it will be privileged to settle those credits that are considered necessary to prioritize, such as, for example, mortgage, specific, labor or pledge credits.

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