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Why haveprepackaged bankruptcies become more popularin recent years?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter25: Bankruptcy, Reorganization, And Liquidation

Section: Chapter Questions

Problem 6MC

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Question

Why have
prepackaged bankruptcies become more popular
in recent years?

Expert Solution

Step 1

Prepackaged bankruptcy is a strategy adopted by the organization in order to protect itself from bankruptcy by negotiating with the creditors in advance. This will only be possible if company has entered into chapter 11.

Chapter 11 is a kind of bankruptcy that involves debtors, business affairs, assets, and debts to be reorganized and thus it is called as "reorganization" bankruptcy.

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