The German word Konkurs comes from Latin. Concursus means roughly a gathering. It refers to the creditors coming together when a debtor's assets are divided up in court. Some people also use the synonymous term insolvency. This comes from the Latin word "insolventia", or "solvere", which means to pay. In Germany, the term Konkurs has been replaced by the technical term Insolvenz.

So What Exactly Does Bankruptcy Mean?

The terms bankruptcy and insolvency are used for a borrower who can no longer meet payment obligations to creditors. Even if he sold all his possessions, he could no longer pay back his lenders. What does bankruptcy mean for creditors? For them there is a high risk that they will never see their money again. They will try in advance to get their money back from the borrower.

What does bankruptcy mean in everyday language, and which words are used?

  • Acute insolvency
  • Bankrupt
  • Over-indebted
  • Illiquid
  • Heavily in debt
  • Broke
  • Cleaned out
  • Totally burnt out
  • Short on cash
  • Without a penny
  • Running on empty

The Insolvency Proceedings

Bankruptcy proceedings should only be filed for in an extreme emergency. They must be started by filing a petition with the competent local court (Amtsgericht in Germany). The petition can be filed by the insolvent company itself or by a creditor. The court decides when proceedings begin. The proceedings are meant to divide the debtor's assets among the lenders as fairly as possible. While bankruptcy proceedings are running, no creditor may collect their claims out of court. What does bankruptcy now mean for the insolvent party? It means he has no access to his money. His assets are divided up among the creditors by an insolvency administrator in a strictly regulated, legal manner. Insolvency proceedings can differ depending on a country's legal system. In German-speaking countries the aim is rather a fair distribution of losses. The legal system in the USA, by contrast, tries to give the bankrupt company a quick fresh start.

The Causes of Bankruptcy
There are usually three reasons why a company becomes insolvent.
What does bankruptcy now mean for companies? Either complete insolvency, imminent insolvency or over-indebtedness. The term insolvent applies when there is a lasting state of illiquidity. With impending bankruptcy there may still be money, but there is no prospect of income. For corporations there is also the ground of over-indebtedness. This exists when the total assets no longer cover the large debts.
For individuals, the causes are often divorce, illness or the loss of a job.

What does personal bankruptcy mean for creditors?
The rules for corporate and personal insolvency are quite different. The insolvent person must first try to reach an out-of-court agreement with the creditors. If an agreement is reached, no court bankruptcy proceedings are started. If no settlement with the creditors is reached, the petition is filed and the proceedings begin.