What do businesses do during bankruptcy?
All too often we hear in the news about household names going out of business. Have you ever wondered what happens when these retailers go bankrupt? If you have, you’re in the right place because we’re about to delve a little deeper into this topic.
They get a trustee
Once the company asks the judicial system to intervene, they have to operate under a trustee. This helps to ensure any unsavory scandals arising. Desperate times don’t call for drastic measures; employees still need to be treated fairly and with dignity- despite the chaos!
However, a trustee isn’t usually appointed if the company and creditors are the same. This is because there isn’t as much of an issue because management will often try their best to pull together to get over this tricky patch.
If worst comes to the worst and the site is shut down, the workers will either need to be relocated or laid off. Sadly, it’s usually the latter.
Hopefully, these employees will receive some kind of severance package; however, if the company has been in dire trouble for some time, the may not have anything to offer the workers they’re laying off. In this case, the employees will have to rely on unemployment benefits which for a lot of families, won’t cut the biscuit.
Creditors get paid
The company will also have to sell off all their assets in an attempt to pay the money they owe their creditors. This means real estate, stock inventory, office equipment, cost-savings, etc.
Once all the money is gathered, it’s down to the bankruptcy court to determine which creditor gets what. This process ensures the fairest solution. Unfortunately, in most scenarios most (if not every) creditor will be down the money.