Bankruptcy Information





What Every Investor Should Know Corporate Bankruptcy What happens when a public company files for protection under the federal bankruptcy laws? Who protects the interests of investors? Do the old securities have any value when and if the company is reorganized? We hope this information answers these and other frequently asked questions about the lengthy and sometimes uncertain bankruptcy process What Happens to the Company? How Are Assets Divided in Bankruptcy? Secured Creditors often a bank is paid first Unsecured Creditors such as banks suppliers and bondholders have the next claim Stockholders owners of the company have the last claim on assets and may not receive anything if the Secured and Unsecured Creditors' claims are not fully repaid Federal bankruptcy laws govern how companies go out of business or recover from crippling debt A bankrupt company the debtor might use Chapter of the Bankruptcy Code to reorganize its business and try to become profitable again Management continues to run the day to day business operations but all significant business decisions must be approved by a bankruptcy court Under Chapter the company stops all operations and goes completely out of business A trustee is appointed to liquidate the company's assets

Bankruptcy Basics Chapter Chapter Reorganization Under the Bankruptcy Code The chapter of the Bankruptcy Code providing for reorganization usually involving a corporation or partnership b c d e f g h i j k l m n o p q r s t u v w x y Background A case filed under chapter of the United States Bankruptcy Code is frequently referred to as a reorganization bankruptcy An individual cannot file under chapter or any other chapter if during the preceding days a prior bankruptcy petition was dismissed due to the debtor's willful failure to appear before the court or comply with orders of the court or was voluntarily dismissed after creditors sought relief from the bankruptcy court to recover property upon which they hold liens U S C sect sect In addition no individual may be a debtor under chapter or any chapter of the Bankruptcy Code unless he or she has within days before filing received credit counseling from an approved credit counseling agency either in an individual or group briefing U S C sect sect There are exceptions in emergency situations or where the U S trustee has determined that there are insufficient approved agencies

Bankruptcy in Brief a service of the Moran Law Group Chapter Chapter bankruptcy is a form of reorganization available to individuals corporations and partnerships It has no limits on the amount of debt as Chapter does It is the usual choice for large businesses seeking to restructure their debt The debtor usually remains in possession of its assets and operates the business under the supervision of the court and for the benefit of creditors The debtor in possession is a for the creditors If the debtor's management is ineffective or less than honest a may be appointed A creditors committee is usually appointed by the from among the largest creditors who are not insiders The committee represents all of the creditors in providing oversight for the debtor's operations and a body with whom the debtor can negotiate an acceptable plan of reorganization A Chapter plan is only upon the affirmative votes of the creditors who are divided into classes based on the characteristics of their claims and whose votes are a function of the amount of their claim against the debtor If the debtor can't get the votes to confirm a plan the debtor can attempt to cram down

Chapter Reorganization An Overview Who can use Chapter ? This Chapter of the Bankruptcy Code is available to a business suffering severe financial difficulty but that can be viable if its debt repayments can be reduced or postponed The business can be a corporation partnership or sole proprietorship Chapter can also be used to liquidate the assets of the business and pay the creditors from the realization A chapter liquidation often will obtain a greater realization for the creditors than a Chapter bankruptcy Fast Tracking for Small Businesses A small business can elect to be treated as a small business The case is then put on a fast track and is treated differently than a regular Chapter case A separate hearing to approve the is not mandatory It may be combined with the The appointment of a is not mandatory The debtor has a shortened period of time within which only the debtor may file a plan After the day period expires any party in interest may file a plan however all plans must be filed within days from the date of the order for relief How it Works Automatic Stay The business is protected by an that takes

TITLE TITLE mdash BANKRUPTCY mdash GENERAL PROVISIONS mdash CASE ADMINISTRATION mdash CREDITORS THE DEBTOR AND THE ESTATE mdash LIQUIDATION mdash ADJUSTMENT OF DEBTS OF A MUNICIPALITY mdash REORGANIZATION mdash ADJUSTMENT OF DEBTS OF A FAMILY FARMER WITH REGULAR ANNUAL INCOME mdash ADJUSTMENT OF DEBTS OF AN INDIVIDUAL WITH REGULAR INCOME mdash REPEALED Search this title LII has no control over and does not endorse any external Internet site that contains links to or references LII





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