A renewed interest on business turnaround (BT) has aroused, given the high number of firms which have suffered struggles during the Great Recession. This research focuses on declining firms that suffer the most severe financial distress, bankruptcy, and are also willing to survive and restore their performance. When facing a viability-threatening decline, firms must reverse it by implementing turnaround strategies. Drawing on BT literature, several questions were asked: Is the turnaround framework suitable for bankrupt firms? Are turnaround strategies effective in providing survival and recover performance of the bankrupt firms? Does the intensity of the response impact the turnaround outcome? Does the competitive environment moderate the adoption of turnaround strategies? The difference among successful and failing firms is explained by the strategies adopted. These are classified into two stages: retrenchment and recovery. Retrenchment strategies focus on the stabilisation of decline and correction of operational inefficiencies, while recovery strategies aim to reorientate the firm towards sustainable competitive advantage. This research’s focus is put on the effectiveness of turnaround strategies in the highest severity crisis (bankruptcy) which are expected to impact in firms’ survival and subsequent performance. This is unpacked by testing the link between turnaround success with cost and asset retrenchment and sales increase and investments as recovery strategies. Additionally, both bankruptcy and turnaround backgrounds were linked by overlapping the outcomes of the first (liquidation vs survival) with the outcomes of the second (success vs failure). Also, the shaping role of the competitive environment was taken into consideration. Based on a sample of 599 Spanish bankrupt firms as analytical setting, the findings suggest that cost retrenchment and sales increase are valid turnaround strategies, regardless of the competitive environment. Conversely, asset retrenchment and acquisitions were not generally recommended to bankrupt firms and their effectiveness was moderated by the competitive environment. Also, empirical evidences suggest that success was underpinned on the firms’ own actions and initiative rather than on external conditions. Therefore, the contributions of this research are varied. Firstly, it extends the existing body of research in BT literature, by overcoming two common limitations, heterogenous samplings and the lack of bankrupt firms. This helps to shed to light in the effectiveness of turnaround strategies in extreme severity situations and adds supplementary nuances to the complex turnaround process. Secondly, the research contributes to provide legislators with an empirical validation of measures to achieve success. It also contributes to explain the reasons why some firms survive successfully and others do not. Managerial practice is also enriched with the validation of those recipes that make bankrupt firms viable.