Liquidating chapter 11
In chapter 7, the creditors collect their debts according to how they loaned out the money to the firm (also referred to as the "absolute priority").
A trustee is appointed, who ensures that any assets that are secured are sold and that the proceeds are paid to the specific creditors.
Chapter 7 bankruptcy is sometimes also called liquidation bankruptcy.
In both instances, common shareholders will most likely see little (if any) return on their investments.
As the number of liquidating chapter 11 cases increase across the country, meaningful amounts of funds may remain undistributed notwithstanding the best efforts and compliance with the terms of the confirmed plan by liquidating plan administrators and trustees of trusts formed under liquidating plans. This article focuses on the disposition of funds at or prior to the conclusion of the five-year period prescribed in 11 U. Utilization of undistributed funds for good causes is not without precedent.