Bankruptcy is often defined as 'a state of financial insolvency wherein, the insolvent person or corporation is unable to repay his/it's debt'. There are two basic situations where a person or corporation is termed and adjudged to be bankrupt:
- a situation where the assets of a person are less than the liabilities.
- a situation where the person or organization files for bankruptcy, on his/its own accord, or filing is requested for by the creditors.
Proceedings of bankruptcy are conducted by legal systems of a particular nation, state or regional government, in order to regulate the process of liquidation, auction and claims by creditors. Bankruptcy law plays a highly instrumental role in adjudication and regulation of a bankruptcy case. Filing of such a case also prevents creditors from abusing the bankrupt organization or person, and curbs the probability of illegal or exorbitant claims by any party. Based on the nature of their proceedings and governing laws, types of bankruptcy proceedings have been established by the court of law
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