Chapter 10 bankruptcy – What is this?

The Chapter 10 bankruptcy  is basically a clause under the US Bankruptcy Code describing how a company can save itself by applying for court protection from debtors. The Court then appoints an independent manager, who advises the company  on how it should be reorganized so it can continue to function and recover from its financial crisis.

To enjoy the benefit of the Chapter 10 bankruptcy clause, the company would have to allow the Court to review its current financial condition without any limits. It would also have to accept the recommendations to reorganize itself as per the advice of the manager appointed by the Court to clear its current debt issues. The Court would carefully examine the situation and if it feels that the company is salvageable – in other words, it is possible with the help of reorganization to come out of debt, it would grant the company protection from debtors under the Chapter 10 bankruptcy clause.

Until the debt is cleared the manager would be the link between the company and the Court. The manager would also continue to have full jurisdiction over the operations of the company until the financial matters are resolved.

Source:  Chapter 10 bankruptcy – What is this?

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