May 23, 2008, Newsletter Issue #65: Chapter 11: A Reorganization, Not a Liquidation

Tip of the Week

Chapter 11 bankruptcy law allows the filing company to devise a plan to pay off former creditors while continuing to operate. This plan is considered a “reorganization” of the company’s operating strategy and financial status, which serves to satisfy former creditors and future creditors at the same time. Instead of simply ordering the company to liquidate all of its assets to pay old debts and cease doing business (Chapter 7), this chapter of the federal bankruptcy code is designed to save a company from extinction. This section of the bankruptcy code has proven to be critical to many U.S. businesses, e.g. Chrysler Corporation, allowing them not only to exist, but to prosper over the long term. The rationale for this section is that a company may be worth much more to its creditors if considered a “going concern” rather than a dead entity whose assets are sold at “fire sale” prices.

About LifeTips

Now one of the top on-line publishers in the world, LifeTips offers tips to millions of monthly visitors. Our mission mission is to make your life smarter, better, faster and wiser. Expert writers earn dough for what they know. And exclusive sponsors in each niche topic help us make-it-all happen.

Not finding the advice and tips you need on this Bankruptcy Tip Site? Request a Tip Now!


Guru Spotlight
William Pirraglia
Buy My Book