An Alternative to Chapter 11 and Chapter 7 Liquidations Financially distressed companies faced with unlikely prospects for reorganization – and the creditors who can influence their decisions – often take advantage of the chapter 11 liquidation option, where the debtor’s assets can be sold free and clear of all liens, claims, and encumbrances. This leaves […]
Insufficient liquidity shrinks the range of options for a financially distressed business. The metaphor of a melting ice cube is often used to illustrate the situation. When the cash runs out and the company is unable to pay its employees or vendors, the ice cube has melted. The business has failed, and recoverable value has collapsed.