When an organization is unable to honour its financial obligations or make payment to its creditors, it files for bankruptcy. It is a legal course undertaken by the company to free itself from debt obligations. It is a process to liquidate the company's assets to repay its debt obligations.

A bankruptcy filing is a legal course undertaken by the company to free itself from debt obligations. debts which are not paid to creditors in full are forgiven for the owners. Bankruptcy can allow you a fresh start, but it will stay in your credit reports for a number of years and make it difficult to borrow in the future.

Often bankruptcy leads to the death of the company due to the following reasons :

1. A record of bankruptcy will appear on your credit report which leads to lowering the credit score of the company.

2. Bankruptcy filing can make it difficult to get another loan or mortgage for many years.

3. Sometimes not all personal property and real estate will fit under an exemption. This means the court can seize some of your property and sell to pay it to your creditors.

4. Some Potential employers & landlords ask questions about any recently filed bankruptcies and this can negatively affect your chances for job and housing stigma.

Few examples of companies that failed to innovate, resulting in business failure :

1. Blockbuster Video Company

It was founded in 1985 and was one of the most iconic brands in the video rental space. Unable to transition towards a digital model, Blockbuster filed for bankruptcy in 2010.

In 2000, netflix approached blockbuster with an offer to sell their company to blockbuster for US$50 million. But, the Blockbuster CEO was not interested in the offer as it was losing money at that time.

2. Polaroid

Polaroid was founded in 1937, best known for its instant film & cameras. Despite its early success in capturing a market, Polaroid neglected the need to explore new territory and enhance their long term viability.

The original Polaroid was declared Bankrupt in 2001 and its brand and assets were sold off. In May 2017, the brand and intellectual property of the Polaroid Corporation was acquired by the largest shareholder of the Impossible Project, which had originally started out in 2008 by producing new instant films.

3. Borders

Borders was an international book and music retailer founded in 1971. With locations all around the world but mounting debt, Border was unable to transition to the new business environment of digital and online books. Its wrong steps included holding too much of debt, opening too many stores as well as jumping into the e-reader business too late.

It closed all of its retail locations and sold off its customer loyalty lists to competitor Barnes & Noble for US$ 13.9 million.

4. Pets.com

It was an online business that sold pet accessories and supplies direct to consumers over the world wide web. It failed to compete with a unique positioning strategy but instead decided to compete with low prices just like its competitors. This mistake led to the selling of merchandise at prices below cost for the duration of its operations. US$ 300 million of investment capital vanished with the company's failure.

5. Compaq

Compaq was one of the largest sellers of PC's in the entire world in the 198's& 1990's. company's sales dropped in 1999 and was acquired for US$ 25 billion by HP in 2002.

6. General Motors

General motors was one of the most important car manufacturers for more than 100 years. It stopped making profits in 2005. As the losses mounted and the economy struggled, these losses became so significant that General Motors could not survive as a viable business. In spite of billions of dollars of government support, the only solution for general Motors is to declare Bankruptcy and try to lower those fixed costs through a court process.