Question
Asked Feb 4, 2019

What are possible reasons for a company with $20 million worth of assets that files for chapter 7 bankruptcy and a secured creditor with claims of over $100 million and the building as a secuirty end up with nothing?

check_circleExpert Solution
Step 1

A secured creditor will invoke the security and take home the proceeds from the sale of seurity. Reasons why a secured creditor may not get paid anything under chapter 7 bankruptcy filing is:

  1. The value of the building has fallen down to zero
  2. There is no buyer for the property
  3. In case, the secured creditor isnot having the first charge and the proceeds from the sale of the property is just adequate or inadequate to service the first chsrge holder
  4. The building or the property's title is not clear
  5. There are title issues and or litigations going on the property / building available with the secured creditor a security

 

Step 2

Some more reasons can be:

  1. The secured creditor is not able to prove its mortgage or encumbrance on the property.
  2. The ass...

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