Question

Liquidation or reorganization is the result of a bankruptcy proceeding. Which occurs depends on whether the firm is worth more "dead or alive."

Answer 1

There are two results of Bankruptcy Proceeding

• Liquidation
• Reorganization

Under Liquidation, Liquidator(trustee)who is appointed to handle liquidation process,sell all the assets of debtor and used this proceedings for making payment to creditors. After realizing of assets and payment to creditors,company gets permanently dissolved.

Reorganization is different from liquidation .In this process debtor make negotiation with creditors and reschedule the debt payments.But this is only possible if debtor has enough resources to make payment to creditors under reschedule plan.Once this reorganization plan approved by creditors and successfully implemented ,company change into regular business .Now company is free from all obligations.

Whether to liquidate or reorganize the business ,depend on financial position of firm.To make decision regarding this bankruptcy trustee analyse debt of debtors,its terms and conditions,payment schedule,time period to pay the debt and assets owned by firm.