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What are the Causes of Bankruptcy?

As a general rule, a class of creditor holding a higher priority claim under the U.S. bankruptcy code to the proceeds of the sale or liquidation of the assets of a bankrupt company must be paid in full before creditors holding lower priority claims receive any payment.

According to the essay referenced above, a trustee would have other responsibilities in this Chapter 7 bankruptcy. In addition to taking possession and control of the assets of the debtor company, in a bankruptcy filing of this size, the trustee would almost certainly investigate the financial affairs and hire experts to examine the books and records of GM to determine if the bankruptcy resulted from fraud, embezzlement, or simple mismanagement. The trustee would examine the Proof of Claim documents filed by creditors of GM and could object to the dollar amount of the Claims or the claimed priority status of anyone filing a Proof of Claim. The trustee would attend hearing in U.S. Bankruptcy Court on various motions and would have an opportunity to object to them. In a liquidation bankruptcy of this size, it is clear that no single person could possibly be the only person administering all of these tasks. Therefore, the trustee and his or her staff would also be responsible for investigating the possibility that payments or other transfers of assets made by GM within what the U.S. Bankruptcy Code refers to as the preference look back period were in fact preferential transfers as defined in the bankruptcy code. If so, the trustee could ask the Bankruptcy Court to order repayment of these preferential transfers or of any other transfers made for less than fair market value under the theory of fraudulent conveyance to the estate that the trustee is responsible for administering ("Chapter 7 Bankruptcy").

According to a third essay published on the Encyclopedia of Credit website, a Chapter 11 bankruptcy is a financial reorganization in which the debtor...

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What are the Causes of Bankruptcy?. (1969, December 31). In Retrieved 22:36, July 22, 2017, from
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