Corporate bankruptcy lawyer is someone who specializes in cases dealing with bankruptcies relating to public companies. According to the federal bankruptcy laws, public companies can file bankruptcies under Chapter 7 or Chapter 11. Any corporate bankruptcy lawyer will tell you that most companies choose Chapter 11 over Chapter 7. We will discuss the reason later on.
Chapter 7
When your bankruptcy lawyer advises you to file for a corporate bankruptcy, under Chapter 7, there are a series of events that would happen once you do so. Filing under Chapter 7 would lead to stoppage of all your company's operations. In other words, your company will completely go out of business.
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A trustee is appointed by the court. The job of the trustee is to sell all the assets of the company. The money that is generated is then used to pay off the debt of the company. Investors who have the least risks are paid first. In other words, secured creditors are paid first. Bondholders are paid next because they represent the debt of the company.
According to the bankruptcy law relating to corporate bankruptcy, stockholders are paid the last. That is only if some sale proceedings are left. This is because stockholders own the company and take on a greater risk as compared to secured investors. Stockholders make money when the company is doing well and stand to lose the most when the company goes through a bad phase.
Chapter 11
Under Chapter 11, the bankruptcy proceedings follow a different course of action. Your corporate bankruptcy attorney will advise you to file under Chapter 11, because it gives the debtor company a chance to reorganize and try to become profitable again. Once Chapter 11 is filed, a committee is set up which comes up with a reorganization plan. Under Chapter 11, the company still runs its day-to-day business, but all major decisions have to be approved by the bankruptcy court.
As a debtor you must understand that corporate bankruptcy is a very time consuming and expensive process. It is a process that cannot be done without an online attorney who specializes in corporate bankruptcy. You cannot make do with a general bankruptcy attorney, you need specialized help.
Besides being a time consuming process, bankruptcy can have serious and grave effects on a business., this can spoil your credit. A corporate bankruptcy lawyer will provide you all the professional help that you need. A bankruptcy that goes smoothly and right will provide you the fresh start that you are looking for.
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