Bankruptcy is the legal process in which a company or person is declared insolvent - unable to pay its obligations. Bankruptcy proceedings are conducted by the bankruptcy court and aim to liquidate assets and distribute values equally among creditors.
When does bankruptcy occur?
Bankruptcy can occur when a debtor - private individual or company - can no longer meet their financial obligations. It is not enough that an invoice is not paid on time; there must be a lasting insolvency, often preceded by a long process of reminders, payment reminders or creditor negotiations.
Both creditor and debtor can file a bankruptcy petition.
Company bankruptcy: When the business has to close
If a company can no longer pay its bills and there is no prospect of recovery, it can be placed in bankruptcy proceedings. This typically happens at the request of a creditor or the company itself.
In such cases, the bankruptcy court will appoint a trustee to take control and manage the business:
- Realization of company assets
- Distribution of funds to creditors
- Winding up the business according to legislation
Bankruptcy ensures that one creditor isn't favored over others - and that the resolution is structured and fair.
Restructuring as an alternative to bankruptcy
Before bankruptcy becomes an option, the company can try to carry out a reconstruction. This is a process that aims to bring the economy back on its feet, for example by writing off debt, finding new investors or changing operating models.
If the reconstruction is successful, bankruptcy is avoided. If not, the case will typically end in insolvency proceedings.
Personal bankruptcy: When personal finances collapse
Private individuals - like companies - can be declared bankrupt if they cannot pay their debts. In such cases, the bankruptcy court will assess the person's finances and any assets (e.g. home, car, cash) will be realized for the benefit of the creditors.
It is important to emphasize that personal bankruptcy does not automatically lead to debt relief. Debt relief is a separate process that requires the approval of the bailiff court and an assessment of whether the debtor meets the necessary conditions.
What typically leads to bankruptcy?
There is rarely a single cause. The most common factors include:
- Manglende styring af økonomi og likviditet
- Større tab på debitorer eller nøglekunder
- Lack of access to finance
- Failure in strategy, leadership or market alignment
Early identification of at-risk customers or unstable suppliers can help avoid your own losses due to someone else's bankruptcy.
Avoid financial surprises with Qatchr
Qatchr allows you to spot danger signs before it's too late. With access to bankruptcy data and analysis of company relationships - both direct and indirect - you get:
- Insights into historical bankruptcies related to the company's ownership group
- Analysis of potential risks based on previous bankruptcies
- Ability to check the CVR details of people associated with bankrupt companies
It can be the difference between due diligence and a financial loss.
Try Qatchr free for 14 days and discover how proactive credit management can help you protect your business.
