Fixed Income Investments - Bondholder's Rights

The Bankruptcy Process
Bankruptcy - this is the dirty little word that most debt holders hate to hear. It occurs when an entity can no longer make the payments to its creditors. Bankruptcy grants the entity protection from creditors. The entity can then decide whether to liquidate the company by selling everything and leaving no surviving entity or to have a reorganization. With a reorganization, a new entity will emerge after the bankruptcy. A bankruptcy can occur in two ways:

  • Voluntary - the company decides to pull the plug by itself.
  • Involuntary
Other Types of Bonds


Related Articles
  1. Bonds & Fixed Income

    Understand the Security Types of Corporate Bonds

    Any investor should be aware of the different security types regarding corporate bonds as well as the direct correlation to potential recovery rates.
  2. Bonds & Fixed Income

    An Overview Of Corporate Bankruptcy

    If a company files for bankruptcy, stockholders have the most to lose. Find out why.
  3. Investing Basics

    Not All Debt Holders Are Equal

    Senior debt is borrowed money a company repays first if the company goes out of business.
  4. Investing

    Chapter 11 Bankruptcy: Is It Better To Be a Stockholder or Bondholder? (BTU)

    Discover why energy companies are struggling to stay solvent, while examining the basics of Chapter 11 bankruptcy and its effect on stock and bond holders.
  5. Bonds & Fixed Income

    Taking Advantage Of Corporate Decline

    A bankrupt company can provide great opportunities for savvy investors.
  6. Markets

    How Corporate Events Affect Stock- And Bondholders

    Investors tend to buy either stocks or bonds, but rarely choose between the two. Find out when you'll benefit from one over the other.
  7. Bonds & Fixed Income

    Corporate High-Yield Bonds vs. Equities

    Equities and corporate bonds often play a significant role regarding the diversification of an investor's portfolio. We put both asset classes in contrast.
  8. Options & Futures

    Should You File For Bankruptcy?

    Find out how to determine whether this option will help or hurt your financial situation.
  9. Economics

    What Does a Creditor Do?

    A creditor is a person or entity that loans money or provides goods or services to another entity with the expectation of being paid back in the future.
  10. Investing Basics

    What's a Debt Security?

    A debt security is a financial instrument issued by a company (usually a publicly traded corporation) and sold to an investor.
RELATED TERMS
  1. Closed-End Indenture

    A term in a bond contract that guarantees that the collateral ...
  2. Collateral Trust Bond

    A bond that is secured by a financial asset - such as stock or ...
  3. Secured Bond

    A type of bond that is secured by the issuer's pledge of a specific ...
  4. Bondholder

    The owner of a government or corporate bond. Being a bondholder ...
  5. Senior Notes

    A debt security, or bond, that takes precedence over other unsecured ...
  6. Cash Collateral

    Cash collected when liquid assets are sold during Chapter 11 ...
RELATED FAQS
  1. What happens when a corporation declares bankruptcy?

    Understand what options are available to corporations under bankruptcy protection, and learn what takes place after bankruptcy ... Read Answer >>
  2. In a corporate liquidation, why are unpaid taxes and wages paid before general creditors ...

    The Bankruptcy Code, section 507, states that when a corporation is liquidated, creditors are paid in a particular order: ... Read Answer >>
  3. Under what circumstances might a company decide to liquidate?

    Learn about the circumstances under which a company may decide to liquidate, and understand how assets are liquidated in ... Read Answer >>
  4. What is the difference between horizontal integration and vertical integration?

    Learn about the differences between bonds and preferred shares, including how payments are made on them and how corporate ... Read Answer >>
  5. What are the differences between chapter 7 and chapter 11 bankruptcy?

    Chapter 7 bankruptcy is sometimes also called liquidation bankruptcy. Firms experiencing this form of bankruptcy are past ... Read Answer >>
  6. What is the difference between secured and unsecured debt?

    Understand the difference between secured and unsecured debt and how the reliability and trustworthiness of the issuing entity ... Read Answer >>
Hot Definitions
  1. Labor Market

    The labor market refers to the supply and demand for labor, in which employees provide the supply and employers the demand. ...
  2. Demand Curve

    The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity ...
  3. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  4. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  5. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  6. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
Trading Center