Asset Deficiency

DEFINITION of 'Asset Deficiency'

A situation where a company's liabilities exceed its assets. Asset deficiency is a sign of financial distress and indicates that a company may default on its obligations to creditors and may be headed for bankruptcy. Asset deficiency can also cause a publicly traded company to be delisted from a stock exchange.

BREAKING DOWN 'Asset Deficiency'

A company that has a chance at recovering financially may file for chapter 11 bankruptcy, under which the company is restructured, continues to operate and attempts to regain profitability. In a worst-case scenario, asset deficiency may force a company to liquidate, in order to pay off creditors and bondholders. The company will file for chapter 7 bankruptcy and go completely out of business. In this situation, shareholders are the last to be repaid, and they may not receive any money at all.

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RELATED FAQS
  1. 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 >>
  2. What happens to the shares of a company that has been liquidated?

    Learn what happens to a company's shares during Chapter 11 and Chapter 7 bankruptcy proceedings, and understand how much ... Read Answer >>
  3. What are the full rights of creditors in cases of bankruptcy?

    Learn more about corporate bankruptcy and the rights of creditors. Find out how creditors are repaid in the event of bankruptcy ... Read Answer >>
  4. What are the differences between Chapter 7 and Chapter 13 bankruptcy?

    Read about some of the primary differences between a Chapter 7 and Chapter 13 bankruptcy, including who may be ineligible ... Read Answer >>
  5. What debts can I discharge when filing for bankruptcy?

    Discover which types of debt can be discharged through a Chapter 7 or a Chapter 13 bankruptcy and which debts require an ... Read Answer >>
  6. Can personal loans be included in bankruptcy?

    Read about debts that are dischargeable when filing for bankruptcy. Learn about how personal loans are treated when filing ... Read Answer >>
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