Bankruptcy

RECENT NEWS
Reuters  May 6  Comment 
The bankrupt operating unit of casino company Caesars Entertainment Corp agreed to grant creditors access to records through an independent examiner probing pre-bankruptcy...
Reuters  May 4  Comment 
A U.S. bankruptcy judge ordered mediation to try to resolve how creditors of Texas' largest power company, Energy Future Holdings Corp, will divide payments that...
The Times of India  May 4  Comment 
The U.S. Supreme Court on Monday ruled against a Massachusetts man battling his mortgage lender over a bankruptcy plan in a case in which the Obama administration and even Bank of America Corp had backed the homeowner.
MarketWatch  May 4  Comment 
Corinthian Colleges files for Chapter 11 bankruptcy protection
Forbes  Apr 30  Comment 
As the Chapter 11 filing of Energy Future Holdings reached its one-year anniversary yesterday, the complex legal and financial issues presented by the company’s capital structure seem as intractable as ever.
Reuters  Apr 30  Comment 
Weak energy prices have forced bankrupt oil-and-gas company Endeavour International Corp to abandon a deal with bondholders to cut its debt by $568 million and instead seek...
New York Times  Apr 27  Comment 
Mr. Miller, of the firm Weil, Gotshal & Manges, represented companies including Lehman Brothers, General Motors and American Airlines, and mentored many of the top Chapter 11 practitioners today.




RELATED WIKI ARTICLES

Related Articles

 
TOP CONTRIBUTORS

"Bankruptcy" is the legally declared inability of an individual or organization to pay its creditors. When a company files for bankruptcy, they do so in Federal Court under the Bankruptcy Code. Creditors may file an "involuntary bankruptcy" petition against a debtor in an effort to recoup what they owe. However, in most cases, bankruptcy is initiated by the debtor, and this is called "voluntary bankruptcy".[1]

To file for bankruptcy, one must always include [2]:

  1. A schedule of assets and liabilities
  2. A schedule of current income and expenditures
  3. A statement of financial affairs
  4. A schedule of executory contracts and unexpired leases


Types of Bankruptcy

Chapter 7

Chapter 7 bankruptcy is also known as liquidation bankruptcy and is governed by Chapter 7 of the Bankruptcy Code.

Any individual, partnership, or corporation can qualify for Chapter 7 bankruptcy. However, in order to qualify, one must have received credit counseling from an approved agency. [3]Firms filing this form of bankruptcy are past the stage of reorganization and must sell off all un-exempt assets to pay creditors. The creditors collect their debts according to the seniority of their debts. A trustee is appointed, who ensures that any assets that are secured are sold and that the proceeds are paid to the specific creditors.

For example, secured debt would be loans issued by banks or institutions based upon the value of a specific asset. Whatever assets and residual cash remain after all secured creditors are paid are pooled together to be paid to any outstanding creditors with unsecured loans: e.g. bondholders and preferred shareholders.

Keep in mind that only an individual debtor (as opposed to a corporation or partnership) may be discharged. In other words, an honest, individual debtor is eligible to lose all liability for a given debt so that he or she may be given a "fresh start." [4]

Chapter 11

A chapter 11 bankruptcy, governed by Chapter 11 of the Bankruptcy Code. allows the company to stay in business while a bankruptcy court supervises the "reorganization" of the company's contractual and debt obligations. The court can grant complete or partial relief from debts and contracts, allowing the company can make a new start.

Chapter 11 bankruptcy doesn't put personal assets of those involved with a given corporation (other than their stock within the company) in danger. However, if the debtor is an individual, both business and personal assets will be involved. If the company filing is a partnership, the lines are slightly blurrier—in some cases the individual partners' personal assets may be at stake. [5]

Often, if the business's debts exceed its assets, then at the completion of bankruptcy the company's owners all end up without anything; all their rights and interests are ended and the company's creditors are left with ownership of the newly reorganized company.

Chapter 11 bankruptcies can be extremely complicated and expensive (in terms of legal and consulting fees) for an organization.


Chapter 13

Chapter 13 allows individuals to undergo a financial reorganization supervised by a federal bankruptcy court. The Bankruptcy Code anticipates the goal of Chapter 13 as enabling income-receiving debtors a debtor rehabilitation provided they fulfill a court-approved plan. This is in contrast to the goals of Chapter 7 that offers immediate, complete relief of many oppressive debts.

However, Chapter 13 bankruptcy has a few advantages for individuals who chose this instead of Chapter 7. The largest of these advantages is the opportunity for an individual to save his or her home from foreclosure. In addition, individuals may be allowed to reschedule secured debts, and thus may give them the opportunity to lower their monthly payments. [6]

Further Reading

References

  1. Wikipedia, Retrieved September 15, 2008
  2. http://www.uscourts.gov/FederalCourts/Bankruptcy/BankruptcyBasics/Chapter7.aspx
  3. http://www.uscourts.gov/FederalCourts/Bankruptcy/BankruptcyBasics/Chapter7.aspx
  4. http://www.uscourts.gov/FederalCourts/Bankruptcy/BankruptcyBasics/Chapter7.aspx
  5. http://www.uscourts.gov/FederalCourts/Bankruptcy/BankruptcyBasics/Chapter11.aspx
  6. http://www.uscourts.gov/FederalCourts/Bankruptcy/BankruptcyBasics/Chapter13.aspx
Wikinvest © 2006, 2007, 2008, 2009, 2010, 2011, 2012. Use of this site is subject to express Terms of Service, Privacy Policy, and Disclaimer. By continuing past this page, you agree to abide by these terms. Any information provided by Wikinvest, including but not limited to company data, competitors, business analysis, market share, sales revenues and other operating metrics, earnings call analysis, conference call transcripts, industry information, or price targets should not be construed as research, trading tips or recommendations, or investment advice and is provided with no warrants as to its accuracy. Stock market data, including US and International equity symbols, stock quotes, share prices, earnings ratios, and other fundamental data is provided by data partners. Stock market quotes delayed at least 15 minutes for NASDAQ, 20 mins for NYSE and AMEX. Market data by Xignite. See data providers for more details. Company names, products, services and branding cited herein may be trademarks or registered trademarks of their respective owners. The use of trademarks or service marks of another is not a representation that the other is affiliated with, sponsors, is sponsored by, endorses, or is endorsed by Wikinvest.
Powered by MediaWiki