First blank - Flexible or Rigid

Second - Stockholders or creditors

5. Understanding reorganization in bankruptcy Chapter 11 of the Bankruptcy Act has several features that can help a firm that is in financial distress. than the absolute priority doctrine. The relative priority doctrine gives a more The relative priority doctrine is more balanced consideration to all claimants. Filing for bankruptcy under Chapter 11 requires the debtor to submit a reorganization plan to the bankruptcy court. The court's responsibility is to scrutinize the proposed plan of reorganization. The court checks if the plan is fair and feasible. Arjen Corp. filed for bankruptcy protection under Chapter 11. The following table describes certain actions the company plans to take as a part of its reorganization plan. Arjen submitted the plan to the bankruptcy court. Determine whether the actions described comply with the bankruptcy code, and select the option identifying whether the bankruptcy court will consider or disregard the action in the plan based on the grounds of fairness and feasibility. Will the Court Consider This Action? Yes No Description Arjen's reorganization plan calls for a reduction of debt from $2.8 billion to $1.5 billion by converting 80% of the debt into equity. Arjen's reorganization plan includes introducing a new product line that has a higher potential for growth than its existing product range. Arjen uses existing revenues to estimate operating conditions and cash flows in the plan. get to control the firm during the bankruptcy proceedings