Corporate Bankruptcy - The Facts

By Author: Quintin Craig
Total Articles: 30
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There are different types of bankruptcy claims that various people and businesses go through. These bankruptcy claims will affect different people in various ways. This is especially true for the investors and stockholders of a company. When a company files for corporate bankruptcy there are certain proceedings that are carried out before any money is distributed among the various people who have a stake in the company.
The first step that is involved for a company which is deciding on a corporate bankruptcy is the course of action that they can take. This action can involve filing a chapter 7 bankruptcy claim. In the chapter 7 corporate bankruptcy claim all of the company's assets are liquidated.
Once the assets have been turned into cash the various creditors will be paid off first. Once they have been paid the secured creditors will be paid their share of the remaining credit money. The rest of the money will then be paid off according to the terms of the claim laws.
The other course of action that can be taken in corporate bankruptcy is to file for chapter 11. With this bankruptcy action you are not liquidating ...
... your entire assists. Instead you are looking at means and ways of paying your creditors within the legal bounds of your financial ability.
In chapter 11 of the corporate bankruptcy you claim full responsibility of the substantial losses that have been incurred. You have your lawyer draw up a reasonable course of action to reorganize your entire company for maximum profit making. This plan will be submitted to court.
The courts will appointee a committee to oversee the reorganization of the company. You should understand that in this corporate bankruptcy action, the committee is taking various courses that pay your debts off to the many creditors who are waiting for repayment.
At any time that you are unable to make a substantial profit or there does not seem to be any signs of progress, the committee will begin dissolving the company's assets in order to pay the creditors. Therefore you might want to talk with your lawyer if you are unsure about the feasibility of this course.
With this bankruptcy claim you agree to a 5 year period of time in which you will pay off the various credit debts that you have incurred. Once you have filed for chapter 13 bankruptcy the court will issue an automatic stay order.
During this stay order you will need to start repaying your loans using an amount that you can afford to pay. Sometimes in the corporate world declaring bankruptcy might seem like financial suicide but it can be the means of re-starting your business newly. With corporate bankruptcy you have different options that you can use to rebuild your business.
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