Viewed from the CSV perspective, the main function of bankruptcy institutions is to establish a clear inventory of all assets and liabilities and to assess the net value of the firm.
The standard setup for financial contracting problems in CSV framework involves two risk-neutral agents, a wealth-constrained entrepreneur with an investment project, and a wealthy investor with capital available.
The fixed capital invested in the project generates random cash flow at future time t with probability distribution over the possible range of profits.
The solution to this problem should provide ex-ante optimal contract structure which specify in which scenario realized cash flow should be audited and certified.
The optimal financial contract in CSV model gives the creditor the right to all assets of the project in the event of default at fixed bankruptcy cost that must be incurred to collect the proceeds.