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A lesson from Economy 101: A company goes defunct when their debt obligations grow bigger than what the company is worth. It is said that "liabilities are bigg

A lesson from Economy 101: A company goes defunct when their debt obligations grow bigger than what the company is worth. It is said that "liabilities are bigger than asserts" on the balance sheet: http://en.wikipedia.org/wiki/Balance_sheet http://en.wikipedia.org/wiki/Balance_sheet So if the company can not pay its debt, the company is given to its debtors. So THERE IS ALWAYS SOMEONE WHO OWNS the house, those that expended the money for the house to be built and own the debt. Odds are that the $300.000 is worth $100.000 in the open market today(if they want to recoup the investment) and they will loose money but it is not $0 or $16.

kragen 15y ago
You mean "to its unsecured creditors," not to its debtors. And actually, during bankruptcy, the company's assets are conveyed to a trustee, not directly to the creditors; the trustee pays the creditors the proceeds of the sale of the assets. And you're mistaken about when bankruptcy happens; a company can have a negative book value (assets minus liabilities) indefinitely as long as none of its creditors goes unpaid and files a (successful) bankruptcy petition against it as a result. It is less common, but certainly not unheard of, for bankruptcy petitions to be filed against companies with positive book values. (The company might be badly mismanaged, or it might have a lot of its book value tied up in illiquid assets it can't find a buyer for.) Given this litany of errors, you ought not be offering the rest of us "lessons from Econom[ics] 101" and posting sentences in all capital letters. Now then, I believe that in Texas law, and in the common law in general, you cannot abandon title to land. However, that is not the case for many other assets; if a company abandons some chattel property, before or after entering bankruptcy, the bankruptcy trustee does not gain the right to sell that property. Also, under civil law, which is in effect over much of the world (although not in Texas), title to land can indeed be abandoned. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1348211 http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1348211

kragen 15y ago

You mean "to its unsecured creditors," not to its debtors. And actually, during bankruptcy, the company's assets are conveyed to a trustee, not directly to the creditors; the trustee pays the creditors the proceeds of the sale of the assets. And you're mistaken about when bankruptcy happens; a company can have a negative book value (assets minus liabilities) indefinitely as long as none of its creditors goes unpaid and files a (successful) bankruptcy petition against it as a result. It is less common, but certainly not unheard of, for bankruptcy petitions to be filed against companies with positive book values. (The company might be badly mismanaged, or it might have a lot of its book value tied up in illiquid assets it can't find a buyer for.) Given this litany of errors, you ought not be offering the rest of us "lessons from Econom[ics] 101" and posting sentences in all capital letters. Now then, I believe that in Texas law, and in the common law in general, you cannot abandon title to land. However, that is not the case for many other assets; if a company abandons some chattel property, before or after entering bankruptcy, the bankruptcy trustee does not gain the right to sell that property. Also, under civil law, which is in effect over much of the world (although not in Texas), title to land can indeed be abandoned. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1348211 http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1348211