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Definition of Bankruptcy
State of being unable to pay debts. Thus, the ownership of the firm's assets is transferred from
The reorganization or liquidation of a firm that cannot pay its debts.
The argument that expected indirect and direct bankruptcy costs offset the other
The risk that a firm will be unable to meet its debt obligations. Also referred to as default or insolvency risk.
The argument that expected bankruptcy costs preclude firms from being financed entirely
A legal proceeding for liquidating or reorganizing a business.
A bankruptcy in which a debtor and its creditors pre-negotiate a plan or
Rule in bankruptcy proceedings whereby senior creditors are required to be paid in full
The restricting of liability holders from collection efforts of collateral seizure, which is
The view that issuing debt is generally valuable but that the firm's
The risk that a foreign debtor will be unable to pay its debts because of business events,
The ability of the bankruptcy court to confirm a plan of reorganization over the objections of
A firm that is continuing to operate under Chapter 11 bankruptcy process.
New debt obtained by a firm during the Chapter 11 bankruptcy process.
A set of requirements for a plan of reorganization to be approved by the bankruptcy court.
Events preceding and including bankruptcy, such as violation of loan contracts.
The risk that a firm will be unable to satisfy its debts. Also known as bankruptcy risk.
Plan for reorganization
A plan for reorganizing a firm during the Chapter 11 bankruptcy process.
A bankruptcy practitioner appointed by secured creditors in the United Kingdom to oversee the
Debt that, in the event of bankruptcy, must be repaid before subordinated debt receives any payment.
The order of repayment. In the event of bankruptcy, senior debt must be repaid before subordinated
Static theory of capital structure
Theory that the firm's capital structure is determined by a trade-off of the
Debt over which senior debt takes priority. In the event of bankruptcy, subordinated
Statistical measure that quantifies the distance (measured in standard deviations) a data point is from
acid test ratio (also called the quick ratio)
The sum of cash, accounts receivable, and short-term marketable
costs of financial distress
Costs arising from bankruptcy or distorted business decisions before bankruptcy.
Debt that may be repaid in bankruptcy only after senior debt is paid.
Agreement between a company and its creditors establishing the steps the company must take to avoid bankruptcy.
Creditor Proof Protection
The creditor proof status of such things as life insurance, non-registered life insurance investments, life insurance RRSPs and life insurance RRIFs make these attractive products for high net worth individuals, professionals and business owners who may have creditor concerns. Under most circumstances the creditor proof rules of the different provincial insurance acts take priority over the federal bankruptcy rules.
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