Define the following terms: bankruptcy law, Chapter 11, Chapter 7,
trustee, voluntary bankruptcy, and involuntary bankruptcy
The bankruptcy law was enacted with the purpose to protect the firms (which can become profitable in long-term) from creditor’s undue force to liquidate. There are various chapters under bankruptcy law.
The chapter 11 deals with reorganization. Reorganization can be done by two ways i.e. by extension or by composition. By extension, it grants the firm to pay off its debt at later date. By composition, debt liabilities of the firms are reduced.
The chapter 7 in bankruptcy law deals with the liquidation procedures. The company liquidates after confirming that there is no chance of reorganization.
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