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It is confusing for me how bankruptcies work. What happens if a corporate declares bankruptcy? Do they only pay less while keeping everything they invested/bou

• jacquesm 9y ago
  Assuming the bankruptcy isn't called off: The bankruptcy is handled by a liquidator or trustee in bankruptcy. That person / entity will attempt to liquidate the assets and will then pay a portion or all of the debts in order of preference. If there is a remainder (unlikely, but it could be) it will be returned to the shareholders. Depending on the country some creditors will receive automatic preference (such as the taxman). In some cases, for instance if it is believed the company is viable but has been managed badly it is possible that such a trustee will even attempt to keep the company running while they search for a buyer. If debts are re-negotiated or forgiven it is possible for a company to emerge relatively unscathed from bankruptcy proceedings, this all depends on what deals can be made with the creditors. It compares poorly to student loans because those are individual debts and unfortunately individual debts are far harder to discharge than corporate debts.
  • basicplus2 9y ago
    It doesn't really matter for corporations, as a company can be burnt and any debts left will never be paid, and a new company can be created with no debts. This is what structuring related entities is all about. The one that owes all the money (particularly the one paying and owing to employees) had nothing of real value in it.