Bankruptcy is the situation of financial crises where an individual or a firm becomes unable to discharge it's financial liability (both long term and short term). The company may face a problem of financial crises due to various reasons such as carelessness of management, frauds by board of directors and management, large volume of credit sales, increasing bad debts, use of large amount of debt capital etc. If the company faces the problem of financial crises for long time then it comes in a situation of bankruptcy.