The indirect costs of bankruptcy are borne principally by

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Stockholders bear the indirect costs of bankruptcy, as they may lose their investment in the company if it goes bankrupt. Bondholders may also be affected, but they have priority over stockholders in the repayment of debt during bankruptcy proceedings. Managers may face reputational damage or job loss as a result of bankruptcy, but they are not financially liable for the company's debts. The federal government may also incur some costs related to bankruptcy proceedings, but this is not a primary burden.

The Indirect Costs of Bankruptcy Are Borne Principally by