B

Bankrupt

When a company becomes bankrupt, it means it has undertaken several solutions in order to get out of debt, unsuccessfully. The same goes for an individual who becomes bankrupt because he couldn't successfully go through a debt management program. For example, an individual who has a high amount of outstanding debt may try to take out a debt consolidation loan. With this loan he/she will pay off all his creditors in full, and respect the repayment schedule for the respective loan. If he/she defaults on this loan as well, and there is not other solution, he/she can declare bankruptcy. Bankruptcy usually affects the already ruined credit rating, because it will stay on the records for ten years. This means, that it is unlikely that he/she will be able to contract another loan on general good terms as long as bankruptcy is being displayed in the records.

When a certain company declares bankruptcy, this means that it has to discontinue all kind of activity, because of financial failure. There is an alternative to declaring directly bankruptcy, and that is filing for bankruptcy protection. This means, that the company will receive a certain grace period (3 months for example), time within which the company must solve its financial and administrative problems, so that the creditors will be able to recuperate their losses, and the it will not have to declare bankruptcy.