What is a company bankruptcy?
Corporate bankruptcy is a legal process in which a business entity declares that it is unable to fulfill its obligations and is looking for protection against legal steps by its creditors. In the US there are two options for companies under the Bankruptcy Act; Chapter 7 and Chapter 11. Each company, from a single ownership to a company, can submit under one of these two chapters.
Chapter 7 provides instructions for the company to stop the operation and disposal of assets. The ownership of the company is signed to the lawyer bankruptcy. The lawyer is then responsible for closing operations, selling assets and the division of revenues between creditors.
Chapter 11 allows the company to continue operation and attempts to restructure under the leadership of the bankruptcy court. In this type of company bankruptcy, the court is able to grant full or partial relief from debts and contractual obligations of the company. In Chapter 11 Corporate Banruptcy, the company is reorganized and can emerge from bankruptcy that will be able to continue business operations.
In the framework of the company bankruptcy proceedings, the court may allocate binding contracts such as trade union agreements, rental, purchase and operating contracts. This option is most commonly used by large corporations, which are in a recurring cash position and cannot reorganize due to the costs of these binding contracts. Changes in economic climate, low sale of products or rising operating costs can all cause company bankruptcy.
In both chapters 7 and 11, all court proceedings are stopped against the company to provide business time to reorganize and settle their debts. In Chapter 11, debtors have the right to propose reorganization plans. If these plans are taken mostly creditors and meet the court criteria, onibude imposed society.
If the plan cannot be agreed, the company will enter Chapter 7 or return to normal operations. If the company returned to BReligious operations can restore legal action against society. If financing is not quickly obtained, the company usually ends up in bankruptcy.
Not all creditors are perceived equally in business bankruptcy. The creditors have a priority before all unsecured creditors. A secured creditor is a creditor whose debt has been supported by asset or is considered classified as such under US law. Employees are considered the most secure creditor.
shares of publicly traded companies are removed from the stock exchange or excluded as soon as the company files for bankruptcy for bankruptcy. Reports of economic problems tend to reduce the value of these shares before any actual submission of corporate bankruptcy. As a result, shares usually lost a significant amount of value in the period by the administration of corporate bankruptcy.