Emergence Plan

  

Categories: Banking, Entrepreneur

It sounds like the title of either a self-help book about emerging as your authentic self, or a sci-fi TV show about surviving an attack of alien zombies. In actuality, it's about bankruptcy. But it's about the hopeful side of bankruptcy: i.e. leaving it.

There are two main forms of bankruptcy that you'll hear about. There's Chapter 7, which means the company will liquidate its assets, give what it can to its creditors, and then go away forever.

Then there's Chapter 11.

In Chapter 11, the company reorganizes its debts, but the ultimate plan is to get back to business eventually. Those companies emerge from bankruptcy. This is the kind of thing airlines like to do. It's become popular with retailers as well, since Amazon started trying to kill them all.

Once the lawyers figure out all the legal stuff, and the creditors work out how the debts will get restructured, companies in Chapter 11 get to become real companies again. They...emerge. Hence, they need an emergence plan. This details the formal program for leaving bankruptcy.

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Finance: What is Bankruptcy?260 Views

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Finance a la' Shmoop what is bankruptcy well in the old days

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this was bankruptcy you'd go to prison if you couldn't pay your bills and [People in prison for bankruptcy]

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unfortunately there weren't and still aren't a lot of legal high wage earning

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opportunities in prison working your way out of debt on the chain gang wasn't [Prisoners working outside]

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really a thing back then so instead the burden would be on your family to pay

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back the loan you'd promised to pay back and didn't ugly situation it paved the [Officer knocking on a prisoners family member to pay their debts]

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way for some well today bankruptcy has a range of flavors that it comes in but

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basically it exists as a legal vehicle to avoid the aforementioned situation a [Bankruptcy van driving]

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bankrupt person and/or corporation stands in front of a judge they turn

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their pockets inside out with a sad face and the judge then decide who will be [Person opens their pockets inside out in front of a judge]

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paid when and how much well how does she decide the order for who gets paid back

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when? well, it usually prioritizes employees and vendors owed a paycheck

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above banks who have made a loan and under that umbrella all different types

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of loans have different priorities if the bankrupt individual owns a home it's [bankrupt individual in his home on the toilet reading a newspaper]

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usually sold out from under him and anything left after paying off the

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mortgage is used to pay others even if you do survive a bankruptcy your credit

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is pretty much ruined who's going to want to loan you money once you've

01:24

proven that you're not good with being loaned money yeah if you've defaulted in [a really low credit score chart for a bankrupt individual]

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the past on promises to pay people back why wouldn't you do the same thing again

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well remember that twenty dollars you loaned your buddy Eric that he never [Person loaning 20 dollars to friend Eric

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paid back well how eager are you going to be to hook him up with another twenty

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especially since you'd only be feeding his betting on frog fighting habit yeah [Eric betting money on frog fighting]

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not so much so long Eric you'll get the help you need!

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