STRATEGIC BANKRUPTCY Meaning and
Definition
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Strategic bankruptcy refers to a deliberate and planned financial decision made by a company or individual to declare bankruptcy as a strategic move to gain certain advantages or maneuver through a challenging financial situation. This term typically applies to business entities but can also be relevant to individuals and personal finances.
In a strategic bankruptcy, the entity may analyze the potential benefits and risks associated with bankruptcy and decide that it is the most advantageous course of action to achieve specific goals. These goals may include reducing or eliminating debt, restructuring the business, renegotiating contracts, terminating unfavorable leases, and rebuilding or reorganizing the company in a more sustainable manner.
By filing for bankruptcy, the entity can obtain legal protection from its creditors and implement plans to restructure and reemerge as a more viable entity. It allows the debtor to halt creditor actions, negotiate debt payment terms, and potentially discharge certain obligations.
However, strategic bankruptcy may also have negative consequences. It can damage a company's reputation, affect its ability to secure credit in the future, and may lead to legal consequences if it is deemed an abuse of the bankruptcy system.
Overall, strategic bankruptcy involves a deliberate and thought-out decision to utilize the legal framework of bankruptcy to strategically address financial difficulties and achieve certain objectives. It aims to provide a fresh start or a plan for a more sustainable financial future.
Etymology of STRATEGIC BANKRUPTCY
The term "strategic bankruptcy" is a compound phrase composed of two words: "strategic" and "bankruptcy".
1. Strategic: The word "strategic" comes from the Greek word strategia, which means "generalship" or "the art of a general". It entered the English language in the early 19th century, derived from the Latin word strategia and the French word stratégique. Originally, the term was primarily associated with military tactics and referred to the planning and execution of military campaigns.
2. Bankruptcy: The word "bankruptcy" has its roots in Old French and Late Latin. The Old French term "banqueroute" meant "bankrupt". The word was a compound of "banque" (bank) and "route" (broken). "Banque" itself came from the Italian word "banca" (bench or moneylender's table).
