In order for a sole proprietorship to be considered bankrupt, it must be insolvent. Insolvent means that the proprietorship is unable to fulfil its financial obligations by their due date and that there are no assets within the enterprise to cover the debt. In the event of insolvency, the enterprise must be unable to fulfil its obligations for the foreseeable future. As no distinction is made between the finances of the sole proprietorship and the personal finances of the owner, the owner will be declared personally bankrupt in these cases.
The district court will open bankruptcy proceedings at the request of either the person concerned themselves or a creditor.