Examples of bankruptcy in the following topics:
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- In voluntary bankruptcy cases, which account for the overwhelming majority filed, debtors petition the bankruptcy court.
- Commencement of a bankruptcy case creates an estate.
- The United States District Courts have jurisdiction over bankruptcy matters; however, each district court may "refer" bankruptcy matters to the Bankruptcy Court.
- The Bankruptcy Code imposes an automatic stay at the moment a bankruptcy petition is filed.
- The Bankruptcy Code accomplishes this objective through the use of a bankruptcy plan.
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- In most jurisdictions bankruptcy is imposed by a court order, often initiated by the debtor.
- Generally, a debtor declares bankruptcy to obtain relief from debt.
- Usually, when a debtor files a voluntary petition, his or her bankruptcy case commences.
- It is also known as straight bankruptcy.
- Chapter 7 is the simplest and quickest form of bankruptcy available.
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- To avoid the negative impacts of bankruptcy, individuals and companies in financial distress have a number of bankruptcy alternatives.
- A company may reference the Altman Z-score formula in order to determine the likelihood that it will be forced into bankruptcy.
- The formula may be used to predict the probability that a firm will go into bankruptcy within two years.
- For the option of financial management during bankruptcy to exist, a form of bankruptcy allowing reorganization, such as chapter 11, must be used.
- If the company's debts exceed its assets, the bankruptcy can result in the company's owners being left with nothing.
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- There is no guarantee of how much money will remain to repay bondholders in a bankruptcy, therefore, the value of the bond is uncertain.
- When a business is unable to service its debt or pay its creditors, the business or its creditors can file with a federal bankruptcy court for protection under either Chapter 7 or Chapter 11 of the Bankruptcy code.
- As an example, after an accounting scandal and a chapter 11 bankruptcy at the giant telecommunications company Worldcom in 2004, its bondholders ended up being paid 35.7 cents on the dollar.
- In a bankruptcy involving reorganization or recapitalization, as opposed to liquidation, bondholders may end up having the value of their bonds reduced, often through an exchange for a smaller number of newly-issued bonds.
- Bankruptcy Court for the Northern District of Florida.
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- Most creditors are willing to negotiate a settlement to receive a portion of their money and not risk losing everything in a bankruptcy.
- In general, creditors understand that bankruptcy is an option for debtors with excessive debt.
- Therefore, most creditors are willing to negotiate a settlement so that they receive a portion of their money, instead of risking losing everything in a bankruptcy.
- A debt restructuring is usually less expensive than bankruptcy.
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- In the cases of bankruptcy and dividend distribution, preferred stock shareholders will receive assets before common stock shareholders.
- In the event of bankruptcy, common stock investors receive any remaining funds after bondholders, creditors (including employees), and preferred stock holders are paid.
- As such, these investors often receive nothing after a bankruptcy.
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- It states that there is an advantage to financing with debt—the tax benefits of debt, and there is a cost of financing with debt—the cost of financial distress including bankruptcy.
- The reason they do not is because of the risk of bankruptcy and the volatility that can be found in credit markets—especially when a firm tries to take on too much debt.
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- Due to financial leverage's effect on solvency, a company that borrows too much money might face bankruptcy during a business downturn, while a less-levered company may avoid bankruptcy due to higher liquidity.
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- However, both common and preferred stock fall behind debt holders when it comes to claims to assets of a business entity should bankruptcy occur.
- Common shareholders often do not receive any assets after bankruptcy as a result of this principle.
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- As an example, after an accounting scandal and a Chapter 11 bankruptcy at the giant telecommunications company Worldcom, in 2004 its bondholders ended up being paid 35.7 cents on the dollar.
- In a bankruptcy involving reorganization or recapitalization, as opposed to liquidation, bondholders may end up having the value of their bonds reduced, often through an exchange for a smaller number of newly issued bonds.