What are some consequences for filing Chapter 11 Bankruptcy?
Taking an economics class and was wondering what the consequences for a company that files chapter 11 Bankruptcy might be? What does it do exactly in a general sense?
chapter 11 reorganizes the company to pay a large portion of existing debts due to cash flow constraints under current operations. For example, an airline company may have more assets than debts, but insufficient liquidity to meet debt payments as they come due.
Consequences:
- Credit ratings will be downgraded
- Working capital will be depleted in accordance with BK petition
- BK Trustee oversight on business operations until BK is complete
- Potential risk of not being able to reorganize, which could result in liquidation of company (Ch 7)
This entry was posted on Wednesday, January 13th, 2010 at 11:53 pm and is filed under chapter 11. Follow the comments through the RSS 2.0 feed. You can post a comment, or leave a trackback.
Mistaken estimate of market demand
Inadequate planning of the business
Failure to select and use appropriate outside professional advisors
Inability to market product or services effectively
Over dependence on a single individual or on a predicted specific event
Failure to understand capital requirements of a growing business
Poor timing of expenditures due to poor planning
Expedient rather than reasoned decision-making
References :
January 14th, 2010 at 5:00 am
Chapter 11 reorganizes the company to pay a large portion of existing debts due to cash flow constraints under current operations. For example, an airline company may have more assets than debts, but insufficient liquidity to meet debt payments as they come due.
Consequences:
- Credit ratings will be downgraded
- Working capital will be depleted in accordance with BK petition
- BK Trustee oversight on business operations until BK is complete
- Potential risk of not being able to reorganize, which could result in liquidation of company (Ch 7)
References :
January 14th, 2010 at 5:29 am