Simple Explanation of the meaning of Bankruptcy

Generally, every body knows that if any body’s liabilities value is more than its assets then that person is said as bankrupt. But if we deeply study of bankruptcy, then only excess of liabilities over assets is not true sign of bankruptcy because Company can arrange money from market for paying his creditors. Some hidden Goodwill which is not shown in balance sheet can save company for becoming bankrupt and shows its strength.

" So bankruptcy is a situation when companies can not ability to pay its creditor and either company request to court that it has inability to pay to creditors and that time court declares that company as bankrupt and this act is known as bankruptcy. "

When Company/ debtor filed for bankruptcy statement then this is called voluntary bankruptcy.
But If court under the applications of Creditors order to be bankrupt specific firm , at this time , it is called compulsory bankruptcy.