What happens to creditors after a company files for bankruptcy?
When a company files for bankruptcy (under chapter 11), it is able to restructure its debts and pay back creditors in a way that allows the company to stay in business. This can be a complicated process, however, and many creditors are stuck with unpaid bills that they aren't likely to recover anytime soon. Recent examples of companies that have filed bankruptcy are Delta Airlines, Sears Roebuck & Co., General Motors Corporation (GMC) and others.
A company's creditors are generally listed in order of priority: secured creditors, unsecured creditors, priority creditors (e.g. taxes) and shareholders. Secured creditors are those with collateral on which they could potentially collect if the debtor failed to pay. For example, if a person has a car loan through their bank and the bank later repossesses their car because they defaulted on the loan, then the bank is considered a secured creditor for that car loan. Unsecured creditors are those without collateral who will only receive payment if there is money left over after the secured creditors have been paid back in full (these are typically credit lines or credit cards). Priority debts are usually state and federal taxes; however, they can also be some type of government fines. These priority debts trump all others. Shareholders are last in line—if there's no money left after all the other claims have been satisfied, then shareholders will not be paid back at all (except for any remaining value in the company itself).
If you need help because a company has filed bankruptcy and owes you money, call the Bankruptcy Lawyers at Ascent Law LLC. They will give you a free consultation:
Ascent Law LLC
8833 S Redwood Rd Suite C
West Jordan UT 84088
(801) 676-5506
