Post 1 Bankruptcy is defined as a court proceeding in which a judge and court trustee

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Post 1

Bankruptcy is defined as a court proceeding in which a judge and court trustee examine the assets and liabilities of individuals, partnerships, and businesses whose debts have become so overwhelming that they do not believe they can pay them. The court determines if the debts are no longer owed legally, requiring them to pay the creditor.

The primary reason companies file for bankruptcy is to renegotiate with creditors to receive a lower rate of what they pay. They understand that by filing for bankruptcy, the creditor will not be able to take them to court or receive funds. So they use it as an opportunity to pay a lower amount, with the creditor fearing not receiving any money.

The advantages of a firm filing for bankruptcy are that it allows for credit discharging debts and credit rebuilding. The main reason bankruptcy is filed by firms is to clear debt owed. Creditors will no longer contact them to collect debts once the automatic stay is implemented. It allows them to receive a fresh start with another opportunity to make proper financial decisions for the company to grow. Another benefit of firms filing for bankruptcy is rebuilding their credit. The score will be negatively affected initially; however, after the record is cleared up, the credit score will grow over time.

The disadvantages of filing for bankruptcy are that some obligations cannot be overstated and limits to filing for bankruptcy. Companies file for bankruptcy believing in clearing up their debt; however, this is not the case for all debt. Tax debts and legal fines are not dischargeable for companies when filing for bankruptcy. Also, there are limitations when filing for bankruptcy for about six years. Lastly, investors will be hesitant to invest in a company that filed for bankruptcy before, with the fear of them doing it again and losing their investments.

It is unethical for a company to threaten an investor in an attempt to renegotiate the terms that were set. Especially if they are not in the financial situation to file for bankruptcy, they should not do just to scare the creditor. In addition, they would destroy their reputation as creditors will inform other creditors not to invest with the company. So it would be beneficial for their long-term success to practice good ethics.

Post 2

Bankruptcy has developed into a tool that entrepreneurs routinely utilize in the global capitalist system. Knowing what could happen in bankruptcy can be quite helpful when reorganizing a firm without filing a business. Thus, some of the pros for bankruptcy filing include conversion of short-term to long-term debt. Until a reorganization plan is approved, bankruptcy's automatic stay prevents the repayment of pre-petition unsecured debt. Pre-petition unsecured debt of this kind is normally repaid post-confirmation over a number of years after the present debts of the person or business have been settled. Secondly, there is relief on interest rate where, the Bankruptcy Code allows for the gradual repayment of debt. Secured claims may be added to the list of debts that are being paid off later as long as interest is charged at market rates. Third, bankruptcy filing can help a firm get a chance of getting working capital. Unsecured debt that was due before the filing of the reorganization case cannot be paid off until the reorganization plan is approved.

However, some of the cons to bankruptcy filing include tortious or criminal behavior sanitization. The automatic stay provided by the Bankruptcy Code does not preclude state authorities from pursuing criminal charges or intervening to promote the health and welfare of the state. Also, there one may experience negative effect on future finances. Ones future financial situation might be impacted by bankruptcy filing, which can stay on the credit report for up to 10 years. Although declaring bankruptcy might be problematic for the credit history, many debtors already have a troubled past.

Therefore, while the cost, reputation, and pain of a bankruptcy proceeding may restrict their use, the Bankruptcy Code's remedies are sufficiently potent that all business professionals should have them in their toolkit. Therefore, I believe that the bankruptcy strategies used are ethical.

What is your take on what is discussed in each post? Do you agree or disagree?