Al owns all the shares in Star Manufacturing Inc. Star became $800,000 in debt and declared bankruptcy. Al then went to his brother and got a loan for $150,000 and Al then incorporated a new corporation called Nova Manufacturing Inc. Al owns all the shares in Nova. When the trustee in bankruptcy had a sale of all the assets of Star Manufacturing Inc., Al went to the sale on behalf of Nova and bought all the assets of Star for $100,000 (about 10% of their original value) as there were no other bidders on the equipment. Al is now carrying on his same business as before but under the name of Nova Manufacturing. The Star creditors who were owed $800,000 and only got a small percentage of what they were owed and are furious that Al is still in business.

Is this legally allowed and is there anything that the creditors can do? Explain.

Answer rating: 100% (QA)

This scenario raises several legal and ethical considerations particularly concerning bankruptcy laws and creditor rights Lets break down the situatio... View the full answer