Typically, businesses declare bankruptcy when they are burdened by debts they can’t hope to pay off. They are then protected from the demands of creditors for a period of time, allowing them to either liquidate assets to pay debt, or restructure the business to return to profitability. It’s a beneficial system for both debtors and creditors because it helps businesses to pay off debts that would have just pushed them into oblivion otherwise.
When Kodak declared bankruptcy in January of 2012, the company had some serious debts to pay off, including $2.8 billion in unpaid pensions to former UK employees. To put that in perspective, the company is projected to bring in just $2.5 billion in revenue this year.
After selling more than a thousand patents and axing its consumer imaging operations, Kodak has now eliminated much of the debt that’s been hanging over its head. But even with the debt under control, one bankruptcy is often a sign of bad things to come.