Apr. 28--Ever since U.S. financial services giant Lehman Brothers Holdings Inc. collapsed in September, in what many have called the worst corporate failure in U.S. history, the global economy has been heading south.

Teetering on the edge, U.S. auto giant General Motors Corp. amply demonstrates that size is no guard against failure.

But what is the situation in Japan? And what steps must a company going through bankruptcy proceedings take?

Generally speaking, a business is considered bankrupt when it is unable to repay its creditors. But there are various paths a collapsing firm may take, depending on what nation's laws it is following, including reorganizing or liquidating its assets.

How many companies have gone under lately?

Corporate bankruptcies in Japan rose 12.39 percent in the business year that ended on March 31 from the previous year to a six-year high of 16,146, with outstanding debts expanding 2.5-fold to ¥14.02 trillion, according to a survey by credit reporting agency Tokyo Shoko Research Ltd. on failed firms leaving debts of at least ¥10 million. The number of bankruptcies increased for the third consecutive year.

All 10 industrial sectors saw bankruptcies increase amid the worsening recession.

The transportation sector posted the fastest rise, followed by the real estate sector and the information and communications industry.

Twelve firms, including Lehman Brothers Japan Inc., the Japanese unit of the U.S. brokerage giant, failed with debts of ¥100 billion or more in the year, up from only three in fiscal 2007.

How many ways are there for a business to pursue bankruptcy proceedings in Japan?

There are six ways, including two out-of-court procedures, according to Japanese credit research firms.

If the company decides to revive its business, there are two legal routes available: filing for court protection from creditors under the Corporation Reorganization Law or under the Civil Rehabilitation Law.

"There are two big differences between the two laws -- whether the court appoints an administrator to continue business and whether a creditor can pursue its claim against a failed firm," said Kazuaki Nagai, a lawyer at Anderson Mori & Tomotsune.

Under the Corporation Reorganization Law, aimed at firms whose failure would have a big impact on society, the management must resign and a new team is brought in according to a reorganization plan devised by a court-appointed administrator.

Although this procedure allows the company to sever ties with executives deemed responsible for the collapse, recovery often takes longer under this process than via the Civil Rehabilitation Law.