Which of the following is true regarding bankruptcy?
A) Liquidation frequently is converted into a reorganization.
B) In a prepack, creditors agree to a reorganization plan prior to the bankruptcy filing.
C) Firms cannot file bankruptcy to escape long-term leases on closed stores.
D) Creditors of the firm may not initiate bankruptcy proceedings.
E) A party other than the current firm management must take control of the firm before it comes out of bankruptcy.

Question

Quizplus · Accepted Answer

In a prepackaged bankruptcy (prepack), creditors agree to a reorganization plan before the bankruptcy filing, which helps streamline the process and can lead to a quicker resolution. This allows the company to restructure its debts with the agreement of its creditors, making the bankruptcy process more efficient.

Which of the Following Is True Regarding Bankruptcy