lecture_bankruptcy_521_2011

lecture_bankruptcy_521_2011 - Chapter 7 Bankruptcy Can be...

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1 Chapter 7 Bankruptcy Can be voluntary or involuntary depending on whether the debtor or creditor files Once bankruptcy petition is filed, an automatic stay takes effect: - Stay prevents creditors from attempting to collect - Prevents one set of creditors from trying to “steal” resources that will ultimately belong to another set The court appoints a trustee. This trustee is responsible for gathering the debtor’s assets, and distributing them to creditors. The trustee distributes the proceeds to creditors – the amount they get depends on their priority/seniority. The firm is thus liquidated.
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2 Chapter 11 Bankruptcy Chapter 11 bankruptcies are also known as reorganization bankruptcies (often occur when a firm cannot complete a private workout as in Marvel) Debtors obtain protection from creditors so that they have time to propose a plan of reorganization to creditors Debtors typically act as their own trustee Many companies begin Chapter 11 bankruptcies and eventually convert to Chapter 7 when it becomes apparent that they cannot successfully reorganize
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3 Major Features of Chapter 11 Bankruptcy 1. Management has 120 days to propose a reorganization plan. This plan must be
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lecture_bankruptcy_521_2011 - Chapter 7 Bankruptcy Can be...

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