Bankruptcy is the legal last resort when debts become unpayable. It provides a structured process — supervised by courts — for dealing with overwhelming debt. The debtor either liquidates assets to pay creditors (Chapter 7 in the US) or reorganizes under a repayment plan (Chapter 11).
Corporate restructuring aims to save the company from liquidation. The company negotiates with creditors to reduce debt, extend payment timelines, or convert debt to equity. Famous restructurings include General Motors (2009, $49.5 billion government bailout), Toys R Us (filed Chapter 11 in 2017), and Jet Airways in India.
India's Insolvency and Bankruptcy Code (IBC), enacted in 2016, transformed debt resolution. Before IBC, recovering debt took 4+ years. Now, the process must complete within 330 days. The IBC has resolved cases worth over Rs 3 lakh crore, making India more attractive to lenders and investors.