There are multiple laws and chapters to deal with a business collapse process, which contain a huge amount of terms and concepts. In this post, we will be talking about some of those elements and their importance in a bankruptcy procedure.

1. Some important bankruptcy
concepts you need to know
By Suzzanne Uhland
Image courtesy of
Jesse Michael Nix
at Flickr.com

2. Through time, one of the most important concepts for companies is
bankruptcy, not only for what it means but also for everything around it.
Today, there are very significant laws that let companies deal with
bankruptcy, giving them the opportunity to surpass a critical economic
or operational situation. If organizations know and understand clearly
what a bankruptcy process involves and the alternatives it gives, they
could be saving the entire organization and its patrimony.
There are multiple laws and chapters to deal with a business collapse
process, which contain a huge amount of terms and concepts. In this
post, we will be talking about some of those elements and their
importance in a bankruptcy procedure. But before we going deeper
with this, it is very important to understand that this kind of situations
could be generated by two different sceneries: a financial insolvency or
an operational problem.
Some important bankruptcy concepts you
need to know

3. We can say that a financial insolvency is related with economic
problems, like credit payment problems, or the
non-compliance with creditors, in other words, insolvency has
a huge connection with debts problems. The operational
problems are those related to the working activities, that is to
say, this is all those situations where the company can not
meet its operational obligations.
Having this clear, then we can define some imperative terms
associated with bankruptcy and its process.
Some important bankruptcy concepts you
need to know

4. Bankruptcy process
In the United States, there are two principal elements to deal with all the
bankruptcy processes: The Bankruptcy Code and the Bankruptcy Rules.
Related: Some important alternatives to deal with bankruptcy by Suzzanne
Uhland
The Bankruptcy Code
For bankruptcy cases, the United States Congress established “the Bankruptcy
Code” in 1978. Through this code, all those laws and components related to
bankruptcy are defined, besides, it guides the way how organizations may act
under this kind of circumstances. Since its creation more than 30 years ago,
“the Bankruptcy Code” has been also known in the United States Code as the
title 11 and since its foundation, it has suffered different changes, making it the
official and legal form to rule and regulate all the bankruptcy cases in the
United States. In other words, “the Bankruptcy Code” is the law to rule every
bankruptcy case presented in the country.
Some important bankruptcy concepts you
need to know

5. The Bankruptcy Rules
The other key element for a bankruptcy situation is “the Bankruptcy Rules”,
which is a set of directions to deal with this kind of conditions. Put differently,
it is the grouping of norms designed and built to deal with a financial or
operative crisis in a particular company.
In resume, these two concepts are those that establish how to legally face a
bankruptcy process. How we have seen in previous articles, a bankruptcy
process is very complex and involves a lot of elements, not only economical
but operational and human, so under these conditions, companies must
have a legal support to know how to deal and what to do to face this.
Understanding the two main legal elements where the bankruptcy process
is held, we can define other significant concepts that must be known for
every organization and their relation with these two supports.
Some important bankruptcy concepts you
need to know

6. The Bankruptcy concept
In a few words, bankruptcy is basically the process where a
particular company or person, has problems to deal with its
obligations, either operational or financial. For legal terms, this
can also be seen as a particular situation mentioned in the “the
Bankruptcy Code”.
If some organization or a particular person is having issues with
its debts or working responsibilities, it has different alternatives
to solve this: As we have mentioned in other posts, one of the
most used solutions is a debt restructuration, which implicates
longer repayment terms. Another very known alternative is to
consolidate all the credit obligations in a single one.
Some important bankruptcy concepts you
need to know

7. Pre-bankruptcy planning concept
This concept is very important for those companies that are
facing a possible bankruptcy case. With a Pre-bankruptcy
planning, they can not only design a new plan for dealing with
their debts but also with their operational activities.
This concept also seeks that the debtor takes advantage of the
exemptions presented in a possible bankruptcy situation.
Through this, the debtor can include some of its assets into
exempt assets, reaching more liquidity and cash flow to
manage its financial and operative obligations.
Some important bankruptcy concepts you
need to know

8. The U.S. trustee
This is a vital figure for any bankruptcy case. The U.S. trustee is
the officer designated by the United States Justice
Department to supervise and control everything related in a
specific bankruptcy case. In other words, it is the one who is
monitoring and administrating the payment terms, plans,
credits status, among other elements within a bankruptcy
process.
Here, we have mentioned some of the most relevant concepts
in a bankruptcy process, but there are many other terms that
need to be consulted by companies, to get a better
understanding and clarity in the event that they have to face a
bankruptcy process.
Some important bankruptcy concepts you
need to know