What happens to creditors after a company files for bankruptcy?
What happens to creditors after a company files for bankruptcy? Tim Cella used to work at several law firms 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 consider...