these are the drop out options

4. Potential problems in reorganization and their solutions Reorganization through workout plans are informal and less costly than formal bankruptcy filings, but informal reorganization also leads to certain problems. Consider the following case: Klose Corp. is worth $15 million as an operating company. The company is in financial distress, and if it were liquidated, the company's value would only be $8 million. To avoid liquidation, an adjustment bureau prepared a reorganization plan that needed the approval of Klose's 10 creditors. Each creditor currently has a claim of $1.5 million toward Klose's assets. The workout plan proposes that each creditor accept a settlement of $1 million in exchange for the $1.5 million outstanding debt. The equity holders will be entitled to a claim of $5 million [$ 15 million - (10 x $1 million)]. However, 2 of the 10 creditors did not agree to the workout plan and refused to tender their bonds for $1 million when the actual face value of the bonds is $1.5 million for each creditor. Considering that two creditors still have a claim of $1.5 million each against Klose's assets, the remaining 8 creditors also rejected the workout plan. Klose Corp.'s situation represents the: O Holdout problem Fraudulent conveyance problem O Common pool problem Federal bankruptcy law helps deal with the problems mentioned in the preceding case. The bankruptcy court imposes the reorganization plan on creditors in a bankruptcy, thus reducing the incentive for creditors to hold out through the fraudulent conveyance statute a cramdown the automatic stay provision