In the year 2008, Wall Street witnessed some of the freakiest events in its glorious history. While Merrill Lynch was forced to sell itself to the Bank of America, Lehman Brothers, had to file for bankruptcy protection. That was recession for global economy that has recovered gradually over the last two years and is still on the path of recovery. Since you're on this web page to seek information on bankruptcy in the corporate world, I gave you the example of Lehman brothers that filed for bankruptcy in 2008. But what is corporate bankruptcy? How does law and rules act, once bankruptcy is declared by a company? We'll know more about similar questions in the paragraphs to follow.
Information About Corporate Bankruptcy
Discussing bankruptcy laws of every country, for their respective corporate bodies is not possible here and so we have restricted to give you an overview of bankruptcy laws in the United States. To avoid bad debt and sail through tough times, corporate bodies can file for chapter 7 bankruptcy and Chapter 11 bankruptcy. Knowing about these two major bankruptcy avoiding tools is a crucial part of understanding what is lost in bankruptcy.
Chapter 7 Bankruptcy
Corporate bankruptcy filings associated to Chapter 7 helps corporate bodies who don't have any pragmatic way to deal with their insurmountable debts. The chapter 7 bankruptcy of the US law is meant for all companies who wish to disengage from all their operations and who're willing to shut down their companies. The bankruptcy court appoints a bankruptcy trustee who manages to sell of assets of the corporate body. Moreover, the sales of assets are a way to repay the creditors of the bankrupt company. Since every big corporate company relies heavily on investors, care is taken by bankruptcy court that all secured creditors and shareholders are able to get their share of money, once a company goes bankrupt. The investors who took the least risk are paid the first, followed by bondholders. Shareholders, who get the maximum profit if a company profits are paid in the last but before the owner of the company. When a company is filing for bankruptcy, the interests of the owner are kept at the last.
Here is some more information about Chapter 7 Bankruptcy laws:
- How to File Chapter 7 Bankruptcy
- Chapter 7 Bankruptcy Information
- Chapter 7 Bankruptcy Questions
If a corporate body doesn't wish to shut down all its activities, it can file Chapter 11 bankruptcy, that is an opportunity to work on the rules of the bankruptcy court so that the company can rebuild its reputation by earning profits. Some of the prominent companies like General Motors and Chrysler filed for Chapter 11 bankruptcy in 2009 and emerged from them, fairly well. It is even said that by the end of 2011, General Motors will turn profitable, thanks to the large-scale reorganization that the company went through, to manage debts effectively.
This was just a summary of Chapter 7 and Chapter 11 bankruptcy filings. Filing for bankruptcy, as stated by bankruptcy lawyers must be the last step an organization must take. Certainly, when biggies like Lehman brothers or any similar corporate giant goes bankrupt, there is a lot of brainstorming that goes in the boardrooms of such companies. Companies must make sustained efforts to keep their financial transactions extremely transparent so that they don't have to face the threats of insurmountable debts. Organizations who're seeking corporate bankruptcy information must carefully hire bankruptcy counselors and lawyers, so that the issues can be handled carefully.
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