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 prepack, creditors agree to a reorganization plan prior to the bankruptcy filing. This allows for a more streamlined and efficient bankruptcy process, as the plan has already been agreed upon by creditors. However, not all bankruptcies involve a prepack and not all bankruptcies lead to a reorganization. Therefore, options A, C, D, and E are false.

Which of the Following Is True Regarding Bankruptcy