Corporate Bankruptcy Under Various Chapters Of The Bankruptcy Code
There are various chapters in the bankruptcy laws in the United States of America that deal with the corporate bankruptcy.
This is the term we use when a corporate body is overloaded with debts and it becomes unable to pay it off with its current income.
It mainly happens because of serious mismanagement of the finances or it might be caused because of some unavoidable circumstances.
No matter whatever is the reason, if a company is unable to pay off its debts, it may file a court petition for bankruptcy in order to get relief of the debts that it owes to the various creditors.
As a common practice, people understand with the term corporate bankruptcy that the company will be closed, as all its assets and properties will be sold off to pay off the debts.
However, this is not the only case.
This is just the one part of the story.
There are other provisions as well, that may allow the company to carry on with its business along with paying off the debts.
It all depends on the specific circumstances and situations that the company is facing.
These provisions have been described in two chapters of the bankruptcy code - chapter 7 bankruptcy and chapter 11 bankruptcy.
Corporate Bankruptcy under Chapter 7 The bankruptcy as per the chapter 7 laws is the most common form for corporate.
This is something that the common person understands with the word bankruptcy for a company.
This chapter is applicable for those companies that have lost all control of its finances and the company is running in huge loss.
There is just no way that the company could recover from the unpleasant situations and pout their business back on the path of profit.
In such scenario, the bankruptcy court may order to liquidate all the assets and properties of the company, in order to pay off the debts that it owes.
The money thus recovered is then used to settle the various creditors' claims.
Corporate Bankruptcy under Chapter 11 Bankruptcy The corporate bankruptcy under chapter 11 is good thing for the companies that are desirous of keep their business running.
These are the companies who have mismanaged their finances, but still have hope that if given some time and favorable conditions, they can get their business back to a profitable state.
The court analyzes the claims of such companies and if it finds the company in hopeful situation, it may allow the company to keep their business running.
In such cases, the court also does a great favor for the suffering company by reducing the creditors' claim to a much lower amount.
For example, as per the order of the court, the company may only need to pay only 35 cents per dollar.
This is the term we use when a corporate body is overloaded with debts and it becomes unable to pay it off with its current income.
It mainly happens because of serious mismanagement of the finances or it might be caused because of some unavoidable circumstances.
No matter whatever is the reason, if a company is unable to pay off its debts, it may file a court petition for bankruptcy in order to get relief of the debts that it owes to the various creditors.
As a common practice, people understand with the term corporate bankruptcy that the company will be closed, as all its assets and properties will be sold off to pay off the debts.
However, this is not the only case.
This is just the one part of the story.
There are other provisions as well, that may allow the company to carry on with its business along with paying off the debts.
It all depends on the specific circumstances and situations that the company is facing.
These provisions have been described in two chapters of the bankruptcy code - chapter 7 bankruptcy and chapter 11 bankruptcy.
Corporate Bankruptcy under Chapter 7 The bankruptcy as per the chapter 7 laws is the most common form for corporate.
This is something that the common person understands with the word bankruptcy for a company.
This chapter is applicable for those companies that have lost all control of its finances and the company is running in huge loss.
There is just no way that the company could recover from the unpleasant situations and pout their business back on the path of profit.
In such scenario, the bankruptcy court may order to liquidate all the assets and properties of the company, in order to pay off the debts that it owes.
The money thus recovered is then used to settle the various creditors' claims.
Corporate Bankruptcy under Chapter 11 Bankruptcy The corporate bankruptcy under chapter 11 is good thing for the companies that are desirous of keep their business running.
These are the companies who have mismanaged their finances, but still have hope that if given some time and favorable conditions, they can get their business back to a profitable state.
The court analyzes the claims of such companies and if it finds the company in hopeful situation, it may allow the company to keep their business running.
In such cases, the court also does a great favor for the suffering company by reducing the creditors' claim to a much lower amount.
For example, as per the order of the court, the company may only need to pay only 35 cents per dollar.
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