Bankruptcy is that situation where a company/business is on the verge of failure; when a company is unable to meet its financial needs and pay back the creditors or when it is not performing well in the market. In such situation the suffering company files for Chapter 11 bankruptcy protection.
Under this claim, the company undergoes listing & recognition of its assets, business affairs, debt, etc. After this, either they attempt to reconstruct/ build again or they fail to do so and end up turning their assets into liquidities (cash form of money).
There are many companies who didn’t come back from bankruptcy (such as- Enron, WorldCom, and Lehman Brothers). But on the other hand, there are various companies which came back from the end and restructured themselves.
• General Motors: In the financial crisis of 2008, the largest automobile company in the world filed for bankruptcy because it was swooped by down payments, recession, credit crisis, etc. But it was saved by the U.S. Dept. of Treasury investing in the company to help it recover.
• Marvel Entertainment: While it may sound surprising that such large cinema company was once going through bankruptcy in 1996. Before entering into cinema, it was only dedicated to comic books. But now, after being recovered, it is now a subsidiary of Disney entertainment.
• Six flags: This is a famous theme park and amusement park operator in America. It also went bankrupt in 2009. But later emerged out from it in 2010.
• Sbarro: It specializes in more than 600 fast-food style pizza. It went bankrupt twice- in 2011 & in 2014. However, some private equity firms collaborated with Sbarro to overturn its image.
Bankruptcy doesn’t mean the dead end of company, it only means a change in strategies. All these companies have re-emerged from zero to become successful businesses.
