Question

QUESTION FOR DISCUSSION: Is it a good thing that we allow an "out" through corporate bankruptcy? Why or why not? Use examples where appropriate to strengthen your argument.

Answer 1

Bankruptcy iis ia ilegal iproceeding iinvolving ia iperson ior ibusiness ithat iis iunable ito irepay itheir ioutstanding idebts. iThe ibankruptcy iprocess ibegins iwith ia ipetition ifiled iby ithe idebtor, iwhich iis imost icommon, ior ion ibehalf iof icreditors, iwhich iis iless icommon. iAll iof ithe idebtor's iassets iare imeasured iand ievaluated, iand ithe iassets imay ibe iused ito irepay ia iportion iof ioutstanding idebt.

i i i i i i i i i i i i i i i i i i i i iIf ia icompany iyou've iinvested iin ifiles ifor ibankruptcy, igood iluck igetting iany imoney iback, ithe ipessimists isay ior iif iyou ido, ichances iare iyou'll iget iback ipennies ion ithe idollar. iBut iis ithat itrue, ithe ianswer idepends ion ia inumber iof ifactors, iincluding ithe itype iof ibankruptcy iand ithe itype iof iinvestment iyou ihold.

When ia icompany ibegins ibankruptcy iproceedings, iits istocks iand ibonds iusually icontinue itrading, ialbeit iat iextremely ilow iprices. iGenerally, iif iyou iare ia ishareholder, iyou iwill iusually isee ia isubstantial idecline iin ithe ivalue iof iyour ishares iin ithe itime ileading iup ito ithe icompany's ibankruptcy ideclaration. iBonds ifor inear-bankrupt icompanies iare iusually irated ias ijunk.

1. Companies ican ifile ifor ieither iChapter i7 ior iChapter i11 ibankruptcy iif ithey're iunable ito ipay itheir idebts.

2. Chapter i7 isimply iliquidates ithe icompany's iassets, iwhile iChapter i11 iallows ithe ibusiness ito icontinue ito ioperate iunder ia ireorganization iplan.

3. If ia icompany iyou've iinvested iin ideclares ibankruptcy, ihow imuch iyou're ilikely ito iget iback iwill idepend ion ithe itype iof ibankruptcy iand ithe ikind iof iinvestment, isuch ias istocks iversus ibonds.

When ia idebtor ireceives ia idischarge iorder, ithey iare ino ilonger ilegally irequired ito ipay ithe idebts ispecified iin ithe iorder. iWhat's imore, iany icreditor ilisted ion ithe idischarge iorder icannot ilegally iundertake iany itype iof icollection iactivity i(such ias imaking iphone icalls ior isending iletters) iagainst ithe idebtor ionce ithe idischarge iorder iis iin iforce.

Declaring ibankruptcy iis ia ipretty iextreme imeasure. iBut iused iin ithe iright iway iat ithe iright itime, iit ican isave iyou imoney, ipreserve iyour ipeace iof imind, iand iget iyou iback ion iyour ifeet ifinancially.