CH18 - Bankruptcy

Question 1

Bankruptcy

Answer 1

When an obligor defaults, its counterparty has various contractual rights to take action against the obligor, such as to claim assets or to take control of the organisation and replace management

• A default of one control often means actual or imminent default of other contracts. Therefore, creditors will work furiously to capture what assets they believe are theirs.
• The obligor, to protect itself from the onslaught of creditors, files for protection under bankruptcy laws. As soon as bankruptcy is filed, creditors must subsume their claims to a bankruptcy proceeding

Question 2

Chapter 11

Answer 2

• Is the bankruptcy law for reorganisation that allows the obligor to work out and restructure its obligations for the purposes of a fresh start, such that it emerges from the bankruptcy proceedings as a viable entity.
• Ch 11 status provides an opportunity to renegotiate all contracts, and nothing is off the table

Question 3

Chapter 7

Answer 3

-Is a bankruptcy law for liquidation in which the obligor is assumed to be unlikely to survive, even with a restructuring; thus it undergoes liquidation.