What is bankruptcy?

Bankruptcy is the legal process by which a company is formally declared incapable of paying its debts and fulfilling its financial obligations.

In practice, this means that the company has reached a state of insolvency, where its liabilities (debts) exceed its assets (assets and available resources) to the point where it is unable to continue operating.

The purpose of bankruptcy is to protect the rights of creditors and ensure that the company’s assets are used to pay off as much of its debts as possible.

Find out what the stages of the process are:

– Bankruptcy Filing: Any creditor can file for bankruptcy when the company fails to meet its obligations, or the company itself can file for bankruptcy if it acknowledges its insolvency.

– Court Decision: A judge reviews the filing and, if he finds that the company is truly unable to pay its debts, officially declares bankruptcy.

– Appointment of an AJ: The judge appoints a judicial administrator to manage the bankruptcy process and coordinate the sale of the company’s assets.

– Asset Survey and Sale: All of the company’s assets and assets are surveyed and evaluated, to be sold and generate financial resources to pay creditors.

– Payment of creditors: The money obtained is used to pay creditors, following an order of priority established by law. Workers’ and tax debts have priority over other creditors.

– Closing: After payment, the judge closes the process and extinguishes the legal entity of the company, which officially ceases to exist.

Bankruptcy is considered the last measure, and is generally adopted when attempts at judicial recovery fail. Unlike judicial recovery, which aims to keep the company running, bankruptcy ends operations and permanently closes the company.

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