The company’s airbags have been linked to at least 17 deaths and 180 injuries around the world.
They have been at the centre of the biggest ever recall in the car industry, with 100 million airbag inflators recalled worldwide including 69 million in the US.
Takata said it was facing $10bn-$50bn (£8bn-£39bn) in liabilities over the airbags’ faulty inflators, which could explode with too much force, sending metal shrapnel flying.
They include billions being claimed by car industry giants such as Honda, BMW, Toyota and others, which have borne the cost of recalls to date.
The bankruptcy process opens the door for a financial rescue by Chinese-owned US parts supplier Key Safety Systems (KSS), which is taking over Takata’s viable operations in a $1.6bn deal.
Meanwhile, remaining operations will be reorganised to continue churning out millions of airbag inflators, the two firms said.
Takata chief executive Shigehisa Takada said: “We’re in a very difficult situation, and we had to find a way to keep supplying our products.
“As a maker of safety parts for the automobile industry, our failure to maintain a stable supply would have had a major impact across the industry.”
KSS will keep on “substantially all” of the Japanese firm’s 60,000 employees in 23 countries and maintain its factories in Japan.
At least $1bn from the deal is expected to be used to help settle criminal charges in the US. Takata has already paid $125m into a fund for victims and $25m to the US Justice Department.
Other issues remain unresolved, with Honda, Takata’s biggest customer, saying it had reached no final agreement with the firm on responsibilities for its recall.
It said it would continue talks with the supplier but anticipated difficulties in recovering the bulk of its claims.
Toyota disclosed that because of the bankruptcy process it risked not being able to recover 570bn yen (£4bn) worth of recall costs from Takata.
But it said this would have a minimal impact on its earnings, as the money has already been set aside.
Takata’s shares are to be delisted from the Tokyo stock exchange next month. They have lost 95% in value since the start of 2014 as the recalls mounted.
The company, once the world’s number two producer of airbags, also makes a third of all seatbelts used in vehicles globally, and other components.
It was plunged into crisis after the ammonium nitrate compound used in its airbags was found to become volatile with age and prolonged exposure to heat, causing them to explode.