Bankakrísin

Bankakrísin, or "bankruptcy" in Icelandic, refers to a legal status granted to individuals or businesses that are unable to repay outstanding debts to creditors. The concept is rooted in Icelandic and international bankruptcy laws, which provide structured procedures for debtors to resolve financial insolvency while offering creditors a fair and orderly process for debt recovery.

In Iceland, bankruptcy proceedings are governed by the *Bankruptcy Act* (*Brotaskrá*), which outlines eligibility criteria, asset liquidation, and repayment priorities. When an individual or entity files for bankruptcy, their assets are typically liquidated under court supervision, and proceeds are distributed to creditors according to a predefined hierarchy. Personal assets may be protected up to a certain threshold, though exemptions vary depending on the case.

Bankruptcy can have significant long-term consequences, including restrictions on credit access and professional licensing. For individuals, it may also impact employment opportunities in certain fields. However, it provides a legal pathway to financial renewal by eliminating qualifying debts, allowing debtors to rebuild their financial standing over time.

Bankruptcy is distinct from other debt relief options, such as debt restructuring or personal bankruptcy alternatives, which may offer more flexible solutions without full asset liquidation. Courts in Iceland oversee these proceedings to ensure fairness and compliance with legal standards, balancing the rights of both debtors and creditors. The process aims to prevent prolonged financial distress while promoting economic recovery.