Bankruptcy - it's a word that few people like to hear, but it can represent great opportunities for investors willing to do a little hands-on research. Bankruptcies are a process that occurs when companies can no longer afford to make payments on their debt. Oftentimes, this comes as a result of a bad economic environment, poor internal management, over-expansion, new liabilities, new regulations and a host of other reasons. This article will take a look at exactly what happens during a bankruptcy, and how investors can profit from it! (For more insight, see An Overview Of Corporate Bankruptcy.)
The Decline The bankruptcy process is often lengthy and complex. While understanding how it works from a theoretical standpoint may be easy, there are many complications that arise when it comes to settlement amounts and payment terms. There are two types of bankruptcy that companies may file: 1. Chapter 7 - This type of bankruptcy occurs when a company completely goes out of business and assigns a trustee to liquidate and distribute all of its assets to the company's creditors and owners. 2. Chapter 11 - This is the most common type of corporate bankruptcy for public companies. In a Chapter 11 bankruptcy, a company continues normal day-to-day operations while ratifying a plan to reorganize its business and assets in such a way that will make it able to meet its financial obligations and eventually emerge from bankruptcy. Read more: Taking Advantage Of Corporate Decline http://www.investopedia.com/articles/stocks/06/bankruptcy.asp#ixzz4hDlK2QRt Follow us: Investopedia on Facebook Comments are closed.
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AuthorJoshua Nahas Archives
May 2017
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