What are the Causes of Bankruptcy?

According to the essay write above, in that location may be many classes of creditors in a Chapter 7 loser. In the case of General Motors, it is likely that there would be multiple classes of secured and unsecured creditors. Generally, a secured creditor is a creditor that has a perfected security interest in the assets of the debtor company. These assets would view been pledged by General Motors to these creditors typically as an bonus to the creditor to extend credit or to lend money to GM. Secured creditors would be paid by the trustee in GM's Chapter 7 bankruptcy before unsecured creditors. As a general rule, a class of creditor holding a higher prior(prenominal)ity birdcall under the U.S. bankruptcy code to the proceeds of the sale or liquidation of the assets of a bankrupt company must be paid in full before creditors holding lower priority claims receive any payment.

According to the essay write above, a trustee would have other responsibilities in this Chapter 7 bankruptcy. In addition to taking possession and control of the assets of the debtor company, in a bankruptcy filing of this size, the trustee would nearly certainly investigate the financial affairs and hire experts to control the books and records of GM to determine if the bankruptcy resulted from fraud, embezzlement, or simple mismanagement.

The trustee would examine the Proof of Claim documents filed by creditors of GM and could objec

If GM filed for Chapter 7 bankruptcy, the assets of the company would be liquidated. Its employees would be terminated. Many of its creditors would not be paid. Its common conduct would in all likelihood become valueless. If GM filed a Chapter 11 bankruptcy, it would be given time to develop a externalise or Reorganization. GM would abide to manufacture vehicles, and continue to pay wages and taxes. Creditors owed money by GM prior to the filing date might see a Plan calling for payment of some fraction of the money owed to them to be paid out over a period of years.

"U.S. bankruptcy Code - Summary." cyclopaedia of Credit. 2008. CMA Business Credit Services. 10 Dec. 2008 .

. evolve a Plan of Reorganization quickly

"Chapter 7 Bankruptcy." Encyclopedia of Credit. 2008. CMA Business Credit Services. 10 Dec. 2008 .

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