1. Bankruptcy Chapter 7 & 11 By: Carmen English

2. Groups Employees Shareholders Suppliers Bond Holders Secured claimants Unsecured claimants Scenario: Business is late on all its payments, starting to foresee trouble. What do you do? Each group decide if you want to force the business into bankruptcy.

3. Type of Bankruptcy Decide which type of bankruptcy you want to force company into Chapter 11: “Intensive care” Reorganization of the business. Helps company get better Chapter 7: “Terminal” Liquidation of company Which one will allow you more money? Which would be better for the company?

4. Chapter 11 Developing a plan- Make company profitable again. Who develops the plan - Company -Committee Always unsecured creditors Secured creditor Stockholders Employees

5. Chapter 11 Plan is sent to bankruptcy court along with disclosure statements Plan is voted on by anyone whose claims are impaired – Do all the groups agree on the plan? – Anyone can file an objection to the plan Court looks at all information, hold confirmation hearing. Decides if plan is feasible, proposed with good faith. Plan is confirmed – Now follow payment schedule of the plan

6. Chapter 11 Year filed for Bankruptcy# of firms filed# of firms emerging 200017917 200125923 200221150 200316033 20048412 20057822 2006452 2007351 TOTAL1,05144

7. Chapter 7 Firm is “dying.” Liquidate all unsecured assets Secured claimants first. Is your secured assets worth the debt owed? Section 726 in the Bankruptcy Code, determines order in which unsecured creditor get paid. 1. Priority claims 2. Allowed unsecured claims 3. Untimely allowed claims 4. Claims for fine, penalty, forfeiture, or damages 5. Interest payment 6. Shareholders http://www.doney.net/bkcode/11usc0726.htm

8. Which is better Ch. 11Ch. 7 – Chance to recover- Get smaller amount of money – Get more money on the dollar- Quicker – Takes 6-12 months – What if doesn’t recover

9. The End Questions ?