A strategic bankruptcy may occur when an otherwise solvent company makes use of the bankruptcy laws

Bankruptcy

Bankruptcy is a legal status of an insolvent person or an organisation, that is, one that cannot repay the debts owed to creditors. In most jurisdictions bankruptcy is imposed by a court order, often initiated by the debtor....

 for some specific business purpose. For example, in 2002 Kmart

Kmart

Kmart, sometimes styled as "K-Mart," is a chain of discount department stores. The chain acquired Sears in 2005, forming a new corporation under the name Sears Holdings Corporation. The company was founded in 1962 and is the third largest discount store chain in the world, behind Wal-Mart and...

filed chapter 11 for protection from creditors; however one of the main problems affecting Kmart's cash flow and therefore liquidity was that they were locked into long term leases at premium rates with respect to various unprofitable stores. While in chapter 11 reorganization, Kmart was able to renegotiate or rescind those particular leases.