Which one of the following statements related to Chapter 7 bankruptcy is correct?
A)A firm in Chapter 7 bankruptcy is reorganizing its operations such that it can return to being a viable concern.
B)Under a Chapter 7 bankruptcy, a trustee will assume control of the firm's assets until those assets can be liquidated.
C)Chapter 7 bankruptcies are always involuntary on the part of the firm.
D)Under a Chapter 7 bankruptcy, the claims of creditors are paid prior to the administrative costs of the bankruptcy.
E)Chapter 7 bankruptcy allows a firm to restructure its equity such that new shares of stock are generally issued prior to the firm coming out of bankruptcy.

Question

Quizplus · Accepted Answer

Under Chapter 7 bankruptcy, a trustee is appointed to take control of the firm's assets and distribute the proceeds from the liquidation of those assets to creditors. This is done to satisfy the firm's debts and obligations as much as possible. The bankruptcy process is usually involuntary, but firms can also file for voluntary Chapter 7 bankruptcy. The administrative costs of the bankruptcy are usually paid first, followed by the claims of creditors. Chapter 7 bankruptcy does not involve reorganization or issuing new shares of stock.

Which One of the Following Statements Related to Chapter 7