What does bankruptcy mean?
Bankruptcy is the legal condition of being unable to repay one's debts, formally recognized and administered under law. When an individual or company files for bankruptcy, courts supervise the settlement: assets may be sold to repay creditors, or debts may be restructured or discharged depending on the type of proceedings involved. The word carries strong connotations of financial collapse and failure, appearing constantly in business journalism ('the chain filed for bankruptcy') and in everyday talk about personal finance. It derives from the Italian expression 'banca rotta', meaning a broken bench — the literal smashing of a medieval moneylender's trading table. Related but distinct, insolvency describes the underlying inability to pay, while bankruptcy is the legal status and process that follows. Because it marks a decisive turning point rather than mere hardship, bankruptcy remains one of the most consequential terms in economic vocabulary.
nounThe legal state of being unable to pay one's debts, in which a person or organization's assets are administered under court supervision for the benefit of creditors; also the formal legal process by which this state is declared and resolved.
- The legal state of being declared unable to pay outstanding debts, with assets administered for creditors.
- The formal legal procedure by which an individual or business is adjudged insolvent and its debts are discharged or restructured.
- (Figurative/extended use) A state of complete financial ruin or depletion of resources.
"After years of mounting losses, the airline was finally forced into bankruptcy."
"The retailer filed for Chapter 11 bankruptcy protection while it restructured its debts."
"His lavish spending ultimately drove the family business into bankruptcy."
The plural is used chiefly when discussing multiple cases of bankruptcy, such as statistics comparing filings across companies, sectors, or years.
"Personal bankruptcies rose sharply during the recession."
The word comes from the Italian 'banca rotta' — literally a 'broken bench', because medieval moneylenders who couldn't pay had their trading bench smashed in public.
Reviewed by Deb Chak, Editor. AI-assisted content curated by RJS Tech Solutions LLP.
Etymology of bankruptcy
Bankruptcy entered English in the early modern period, borrowed through Italian 'banca rotta' ('broken bench'), a reference to the practice of publicly breaking the bench or counter of a moneylender who could not meet his obligations. The second element traces to Latin 'rumpere', meaning to break or burst, the same root behind words like rupture and disrupt. The term thus combines a concrete commercial image with a Latin verb of destruction.
Related word forms
How bankruptcy is actually used
Bankruptcy is a formal, legal term carrying serious negative connotations of financial failure; it is used in both everyday news reporting and technical legal contexts. In the US, specific procedures carry numbered chapter names (e.g., Chapter 7, Chapter 11), which are widely referenced in ordinary speech.
Easily confused with bankruptcy
Insolvency is the financial condition of being unable to pay debts as they fall due, whereas bankruptcy is the formal legal process and status that may follow from it.