It’s been widely reported that Iceland is on the verge of bankruptcy. I know what this would mean for an individual or a corporation - roughly, that a bankruptcy court would be put in charge of distributing the assets to creditors according to criteria set down by law, and any debt not covered by existing assets would be forgiven.
My question is: what does bankruptcy mean for a nation? Are there treaties defining it? Is there some system for overseeing the distribution of assets? Or is it just that Iceland is in danger of defaulting on its debts, and “bankruptcy” is a convenient shorthand for the news media to describe this?