The AP Corporate Archives was established in to document the news, administrative and governance arms of the AP from its beginnings in to the present. Unique among news archives for both scope and content, the collections contain over 4, linear feet of paper records and 10 terabytes of digital collections. 3 hours ago · NEW YORK — (AP) — The storied Manhattan clothier Brooks Brothers is filing for bankruptcy protection. May 23, · ESTERO, Fla. (AP) — Car rental company Hertz files for bankruptcy protection, pushed by debt and coronavirus pandemic.
Lindsey Simon does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment. More than 20, companies file for bankruptcy every year. Although companies follow many different paths to bankruptcy, each one encounters a process that is carefully designed to balance the rights of debtors and creditors. To most people, bankruptcy has a negative image. But the system makes the best of a grim situation by imposing an orderly and open process that preserves value and encourages negotiation.
Bankruptcy reorganizations by well-known brands such as Delta and General Motors show that it can bring parties together and resurrect struggling companies. At the most fundamental level, the Bankruptcy Code creates an estate to collect all assets in one place, identify and categorize claims against the debtor in terms of priority and then distribute the assets accordingly. Chapter 7 cases are designed to liquidate the company, meaning it will no longer exist, and any remaining value is divided up and distributed to creditors.
In contrast, a Chapter 11 reorganization allows a debtor to sell some or all of its assets or propose a reorganization plan that aims to resolve and satisfy enough creditors to re-emerge as a going concern. For example, airlines United, Delta and American all filed for Chapter 11 protection in the mids and managed to unload enough debt to stay aloft.
Once a Chapter 11 plan of reorganization is finalized and approved, a debtor emerges from bankruptcy and continues operating, usually in a stronger position than before. The moment a debtor files its petition, an automatic stay is imposed on creditors, which operates like a pause button on any collection efforts, litigation or similar actions.
Creditors can ask the court to lift the stay under certain circumstances, but the standard for doing so is often difficult to meet. The debtor may ask the court to pause other lawsuits outside of the bankruptcy case if they affect the estate. Debtors then evaluate their problems and make the necessary changes to succeed after reorganizing.
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