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That's... insane. The point of chapter 11 is that the company does NOT liquidate. Most employees DO NOT LOSE THEIR JOBS. Liquidating a functioning but indebt

That's... insane. The point of chapter 11 is that the company does NOT liquidate. Most employees DO NOT LOSE THEIR JOBS. Liquidating a functioning but indebted company destroys any remaining value (there is huge value in the structure of a business -- it's not the sum of inventory and real estate). And most importantly... EVERY SINGLE EMPLOYEE LOSES THEIR JOB There is absolutely no societal value in forcing companies to sell themselves off piece by piece, and sending every employee onto the street. Let the shareholders get wiped out. But don't force the company to fold and collapse unless it's unavoidable!

lend000 6y ago
Companies generally don't file bankruptcy when they are "functioning but indebted." They file when they can't even afford to make their next (or past-due) debt payment, and no creditors will dare to lend any more to them. Don't you think creditors should have a say in whether a company should be allowed to delete some debt and try to become profitable again? If the company is deep in debt beyond its assets, but the creditor thinks the company is a truly valuable business, then it might vote for chapter 11 under certain terms. Otherwise, you are just enabling the bad incentives described in this thread, including rewarding the failed execs with retention bonuses. But as I mentioned in the parent, these bankruptcies do not have a high percentage of success stories, and there are many repeat offenders who take advantage of the system. Yes, people at the failed company will have to find new jobs. That is called structural unemployment, and it is a normal part of progress.
- Ghex 6y ago
  > Don't you think creditors should have a say in whether a company should be allowed to delete some debt and try to become profitable again? Creditors already do have a say don't they? At the moment of filing, director's fiduciary duties expand to residual claimants in addition to shareholders. In addition, creditors have paths to reclaim fraudulent transfers (bonuses included) in court although it is a hard case to win. Creditors can also ask the court to convert to Chapter 7, but this is almost always in no one's best interest (shareholders wiped out, junior creditors wiped out, senior creditors will probably lose a non trivial amount, everyone loses a job).
AdrianB1 6y ago
Most of the companies are functioning but indebted; the ones applying to C11 are sinking, having no cash, more debt that assets (so no guarantees for more debt) and a negative trend. That is not "functional", it's "sinking" or "dying".

lend000 6y ago

Companies generally don't file bankruptcy when they are "functioning but indebted." They file when they can't even afford to make their next (or past-due) debt payment, and no creditors will dare to lend any more to them. Don't you think creditors should have a say in whether a company should be allowed to delete some debt and try to become profitable again? If the company is deep in debt beyond its assets, but the creditor thinks the company is a truly valuable business, then it might vote for chapter 11 under certain terms. Otherwise, you are just enabling the bad incentives described in this thread, including rewarding the failed execs with retention bonuses. But as I mentioned in the parent, these bankruptcies do not have a high percentage of success stories, and there are many repeat offenders who take advantage of the system. Yes, people at the failed company will have to find new jobs. That is called structural unemployment, and it is a normal part of progress.

Ghex 6y ago
> Don't you think creditors should have a say in whether a company should be allowed to delete some debt and try to become profitable again? Creditors already do have a say don't they? At the moment of filing, director's fiduciary duties expand to residual claimants in addition to shareholders. In addition, creditors have paths to reclaim fraudulent transfers (bonuses included) in court although it is a hard case to win. Creditors can also ask the court to convert to Chapter 7, but this is almost always in no one's best interest (shareholders wiped out, junior creditors wiped out, senior creditors will probably lose a non trivial amount, everyone loses a job).

AdrianB1 6y ago

Most of the companies are functioning but indebted; the ones applying to C11 are sinking, having no cash, more debt that assets (so no guarantees for more debt) and a negative trend. That is not "functional", it's "sinking" or "dying".