What happens when a company files bankruptcy?
When a company files for bankruptcy, a “trustee” is appointed by the bankruptcy court. The trustee takes an inventory of the funds and assets belonging to the company and assesses the company’s “creditors,” that is, the individuals or companies to whom the bankrupt company may owe money. There are different categories of creditors and claims: a “secured” creditor, for example, is one who has a security interest in some of the bankrupt company’s assets (for example, your home mortgage is a secured interest because if you don’t pay your loan, the bank can foreclose on your house). A debt can also be “liquidated” or “unliquidated.” A debt is typically liquidated when the amount of the debt is known and unliquidated when the amount is unknown. For example, in an asbestos lawsuit, once you enter into a settlement agreement the debt is generally liquidated; but (depending on the applicable state’s laws) all or part of your claim might be unliquidated if you have not agreed on a settlement am
