| Chapter 7 |
A bankruptcy proceeding where a company stops all operations and goes completely out of business. A trustee is appointed to liquidate (sell) the company's assets, and the money is used to pay off debt.
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The investors who take the least risk are paid first. For example, secured creditors take less risk because the credit that they extend is usually backed by collateral, such as a mortgage or other asset of the company. Next in line are the unsecured creditors, and then the investors. We call this phenomenon "absolute priority."
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An Overview Of Corporate Bankruptcy - As soon as you invest in a company, you face this risk. Find out what it means. |
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Related Terms
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