Insolvency stages explained

Rescue or wind-up: the two paths

The systems on this page separate processes that try to keep a debtor going from processes that end it. In the US, Chapter 11 is known as a reorganization bankruptcy. The debtor usually keeps running the business as a debtor in possession ². Chapter 7 is liquidation, the sale of the debtor's nonexempt property and distribution of the proceeds to creditors ¹. In the UK, a company voluntary arrangement lets an insolvent company pay creditors over a fixed period ⁶. Liquidation closes the company ⁵.

A filing is the start, not the outcome. In the US, filing a petition puts an automatic stay in place, which pauses most collection actions ^1,2. A Chapter 11 case that fails can be converted to Chapter 7 or dismissed for cause ².

United Kingdom: company processes

• Creditors' voluntary liquidation: the company cannot pay its debts and the directors involve creditors in liquidating it ⁵.
• Compulsory liquidation: the company cannot pay its debts and a court is asked to liquidate it ⁵.
• Members' voluntary liquidation: the company can pay its debts but its owners want to close it ⁵.
• Company voluntary arrangement: available only through an insolvency practitioner, and approved if 75% by debt value of the creditors who vote agree ⁶.
• Administration: a separate process counted in the official statistics. There were 102 administrations in England and Wales in September 2026 ⁷.

United Kingdom: individuals

In August 2026, 11,644 individuals entered insolvency in England and Wales. There were 725 bankruptcies, 3,880 debt relief orders and 7,039 individual voluntary arrangements ⁸. There were 5,012 Breathing Space registrations in the same month ⁸.

An individual voluntary arrangement can fail before it ends. Of IVAs registered in 2024, 6.0% terminated within one year. The two-year termination rate for 2023 registrations was 13.2%. The three-year rate for 2022 registrations was 21.0%. About one in three (34%) of IVAs registered in 2016 to 2018 terminated over their lifetime ⁹.

United States: bankruptcy chapters

In fiscal year 2025, which ended on 30 September 2025, debtors filed 557,376 bankruptcy petitions, 53,264 more than in 2024 ⁴. Nonbusiness petitions rose 11 percent to 533,337 and business petitions rose 6 percent to 24,039 ⁴. Chapter 7 filings rose 15 percent to 344,825, Chapter 13 filings rose 4 percent to 203,118, and Chapter 11 filings fell 1 percent to 8,937 ⁴.

• Chapter 7, liquidation: a trustee sells nonexempt property and pays creditors. A meeting of creditors is held between 21 and 40 days after filing. A discharge is usually issued 60 to 90 days after the date first set for that meeting ¹.
• Chapter 11, reorganization: creditors whose rights are affected can vote on a plan, and the court can confirm it if it gets the required votes and meets the law ².
• Chapter 13, individual debt adjustment: the debtor repays creditors in installments over three to five years. Eligibility needs unsecured debts below US$526,700 and secured debts below US$1,580,125. A discharge follows completion of all plan payments ³.

Reading an insolvency headline

Filed for bankruptcy in the US can mean a Chapter 11 rescue attempt or a Chapter 7 liquidation ^1,2. Entered administration and entered liquidation are different counts in the UK statistics ⁷. A members' voluntary liquidation closes a company that can pay its debts ⁵.