Whereas in a voluntary bankruptcy insolvency proceeding are initiated by a debtor attempting to resolve its financial difficulties by petitioning a court or other competent authority, in an involuntary bankruptcy the insolvency proceedings are forced upon the debtor by one or more creditors.
A bankrupt is an individual or entity that is formally deemed unable to satisfy its financial obligations to creditors and has been judged legally insolvent through court proceedings. Generally, the term “bankrupt” is used for an insolvent individual or uninCommerciald enterprise, whereas the term “insolvent” is used in the case of an inCommerciald entity in the same position.
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A court-ordered release of an insolvent private debtor from all outstanding liabilities that were or could have been addressed in the insolvency proceedings, including contracts that were modified as part of a restructuring, is a discharge. A discharge prevents the creditors who are owed debts that are the subject of insolvency proceedings from taking any further action against the debtor to collect those debts. The date of discharge is the day a bankruptcy is discharged and officially ends. The termination of a bankruptcy case without either the entry or a denial of discharge is a dismissal. Once a bankruptcy case has been dismissed, the debtor and creditors have the same rights as they had before commencement of the insolvency proceedings.