Tuesday, July 23, 2024

What happens when public companies go bankrupt?!

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Since 2021, news has been circulating about a crisis threatening the Chinese real estate giant, as the company defaulted on interest payments to bondholders overseas and raised concerns about the unknown fate investors face.

Evergrande Crisis:
He highlighted the plight of Evergrande, China’s second-largest real estate developer by sales, and the world’s 122nd largest conglomerate by revenue, as some viewed it as a snowball threatening the global real estate market. .
The real estate giant recently filed for bankruptcy protection in the US. With the worst real estate crisis in China.

With total debt valued at over $300 billion, the company has become the world’s largest indebted real estate developer.

Partner Status:
In light of these developments, an urgent question has arisen as to what happens when a listed company ceases its operations and is liquidated. A report by the American finance and investment site “Investopedia” indicates that the company’s shareholders may. Depending on the type of shares they hold, they are entitled to a portion of the assets. However, the stock is generally worthless.

“What happens when a company declares bankruptcy?” In response to the question, the statement states that bankruptcy occurs when a person or company claims that they are unable to pay their debts and demands repayment of those debts. For its part, the court liquidates the debtor’s assets to pay some of its obligations. Certain types of assets are protected in a personal bankruptcy, such as a person’s car, personal property, and retirement accounts.

The report states that corporate bankruptcy occurs when a company cannot pay its debt obligations using current assets or cash flows. This can happen due to bad management, bad investments or unfavorable market conditions. Depending on the type of bankruptcy, a company may continue to do business after bankruptcy is declared.

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What is bankruptcy?
In defining bankruptcy, the CNBC report notes that it is a legal process that begins when a person or company is unable to pay its debts and provides a fresh start to those who are unable to pay their obligations.

The bankruptcy process begins with a petition by the debtor, usually filed by or on behalf of the debtor, which is limited, and then all of the debtor’s assets are measured and valued, and the assets can be used to pay off a portion. Loan balance.

In theory, the ability to file for bankruptcy benefits the economy as a whole by allowing individuals and businesses a second chance to borrow or pay off debt in installments, and helps debtors recover a portion of their money and credits.

Pros and Cons:
The Pros and Cons of Bankruptcy report states that declaring bankruptcy can relieve you of your legal obligation to pay your debts and keep your home, business, or ability to work, depending on the type of bankruptcy petition you file.

But it lowers your credit rating, making it more difficult to get a loan, mortgage, credit card, buy a home or business, or rent an apartment.

Positives include allowing borrowers to break out of the default cycle, getting rid of some unsecured debt, and avoiding legal judgments.

As for the negatives, they include a decline in the creditworthiness of the individual, company or entity and the state, as happens in cases where governments default on their debts, leading to a reduction in their credit rating. From them to the flight of investors.

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For some people or businesses, bankruptcy is the right option, especially if the debts are too much to manage, and the alternative may be to liquidate all of your assets. You will harm your credit, investment and business reputation, but at the same time, bankruptcy is a legal channel to avoid a worst-case scenario.

Nadia Barnett
Nadia Barnett
"Award-winning beer geek. Extreme coffeeaholic. Introvert. Avid travel specialist. Hipster-friendly communicator."

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