In case a company cannot pay its debt obligations, bankruptcy laws
A) require that the firm be liquidated and all creditors paid from the proceeds.
B) require that the present management team resign.
C) may allow shareholders to be paid before bondholders.
D) may allow the maturities of present debt to be extended

Question

Quizplus · Accepted Answer

Bankruptcy laws may allow the maturities of present debt to be extended, which can help the company avoid immediate liquidation and give them time to restructure their debts and financial situation. This is referred to as a Chapter 11 bankruptcy. The other options presented in the answer choices are not accurate representations of bankruptcy laws.

In Case a Company Cannot Pay Its Debt Obligations, Bankruptcy