Corporate Bankruptcy Explained
Corporate bankruptcy is a legal process that allows a company to restructure its debt and assets. This process can be used to protect the company from creditors, liquidate assets, or reorganize the business. Corporate bankruptcy can be filed under Chapter 7 or Chapter 11 of the US Bankruptcy Code.
Chapter 7 bankruptcy is also known as liquidation bankruptcy. In this type of bankruptcy, the court appoints a trustee to sell off the company's assets and use the proceeds to pay creditors. The company's operations are ceased and it is dissolved after the bankruptcy proceedings are complete.
Chapter 11 bankruptcy is also known as reorganization bankruptcy. In this type of bankruptcy, the court approves a plan for the company to repay its debts over time. The company's operations continue during the bankruptcy proceedings. After the debts are repaid, the company is discharged from bankruptcy.
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