Law
Business Law.
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March 21, 2005
Every year business and individuals file for bankruptcy it has almost become common practice to do so. Bankruptcy is a legal procedure that begins when an individual or business that can't pay their debts to creditors. Sadly enough, there were as many bankruptcy cases filed in federal courts, as there were all other cases. The American bankruptcy law almost encourages debtors who are unable to pay their debts to file for bankruptcy. Is filing bankruptcy a good thing or a bad thing?
Bankruptcy law allows for business to continue operating depending on what chapter of bankruptcy they file for and how far in debt they are in. Businesses have to consider want chapter to file under chapter 7 or chapter 11. Most times business file bankruptcy to find a way to become more profitable again. Under Chapter 7 liquidation takes place, and the company goes out of business and under chapter 11, reorganization takes place. "The process of starting a claim starts when a bankruptcy petition is filed and then an estate is created. An estate is all the debtors' current assets." "A trustee is appointed to administer the assets during a straight line bankruptcy." The trustee's job is to liquidate the estate, and any money received goes to secured creditors first."(To the extent of their collateral") (Bagley, Constance E. 2002 P. 919) "The unencumbered funds are applied in this order. (1) Pay priority claims, such as bankruptcy administrative expenses, wages or benefits up to 2000 dollars per employee, consumer's deposits up to 900 dollars, and most unsecured taxes; (2) To pay general unsecured creditors with timely filed claims coming before tardy ones." (3) To pay no compensatory fines or penalties;
(4) To ...