bankruptcy proceedings

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A bankruptcy proceeding is a legally authorized procedure that a bankruptcy case follows through the court system which consists of approving arrangements for the repayment of debts to relieve the debtor of their liability to creditors. The whole procedure occurs from the time of filing a bankruptcy petition until receiving a bankruptcy discharge.

Bankruptcy law regulates two types of bankruptcy proceedings: liquidation and reorganization. The liquidation procedures governed by Chapter 7 are used after the insolvency of a company when suppliers are not paid anymore. A reorganization procedure serves to anticipate the financial difficulties of companies to allow for a reorganization before it is too late. 

[Last updated in July of 2021 by the Wex Definitions Team]