Distinguish between Chapter 7 and Chapter 11 bankruptcies. Cite specific examples. Identify any cases where equity...

Distinguish between Chapter 7 and Chapter 11 bankruptcies. Cite specific examples. Identify any cases where equity holders have received payout in bankruptcy?

Expert Solution

The main difference between a Chapter 7 bankruptcy and Chapter 11 bankruptcy is that under Chapter 7 bankruptcy, the debtor's assets are liquidated to pay lenders (creditors), while in Chapter 11 bankruptcy, debtors negotiates with lenders to change the terms of loan rather than to sell off assets.
If a company declares Chapter 11 bankruptcy, shareholders have chance for survival and to recover. Shares might recover with it.
If it declares Chapter 7, the company is dead and also the shares. Shareholders are at last for repayment of their investment.
Example of bankruptcy payout - The amount of the payment a common shareholder will receive is related to the proportion of ownership owned in a bankrupt company.
For example, lets assume a common shareholder owns 0.5% of the firm. If the firm has $100,000 to pay to its common shareholders after bankruptcy, that owner will receive a cash payment of $500.

ekkarill92 answered 2 years ago

Provide examples of companies that filed for Chapter 7 and Chapter 11 bankruptcy.

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