These two conditions laid the foundations for modern strategic bankruptcy. It is also strongly weighted toward retaining the existing management through the process of restructuring, on the basis that the existing management would be most familiar with the business and thus best equipped to preserve as much of its value as possible. In the U.S., Chapter 11 bankruptcy made it possible for a business to declare bankruptcy without actually being insolvent. For game-theoretic problem, see Strategic bankruptcy problem.Ī strategic bankruptcy may occur when an otherwise solvent company makes use of the bankruptcy laws for some specific business purpose other than simple inability to pay debts.
