Chapter 7

AAA

DEFINITION of 'Chapter 7'

A bankruptcy proceeding in which a company stops all operations and goes completely out of business. A trustee is appointed to liquidate (sell) the company's assets, and the money is used to pay off debt.

INVESTOPEDIA EXPLAINS 'Chapter 7'

The investors who take the least risk are paid first. For example, secured creditors take less risk because the credit that they extend is usually backed by collateral, such as a mortgage or other asset of the company. Next in line are the unsecured creditors, and then the investors. This phenomenon is known as "absolute priority."

RELATED TERMS
  1. Official Committee Of Equity Security ...

    A small group of the largest shareholders in a company formed ...
  2. Chapter 11

    Named after the U.S. bankruptcy code 11, Chapter 11 is a form ...
  3. Prepackaged Bankruptcy

    A plan for financial reorganization that a company prepares in ...
  4. Distressed Securities

    A financial instrument in a company that is near or is currently ...
  5. Solvency

    The ability of a company to meet its long-term financial obligations. ...
  6. Chapter 13

    A U.S. bankruptcy proceeding in which the debtor undertakes a ...
Related Articles
  1. Investing

    What happens to a company's stocks and bonds when it declares chapter 11 bankruptcy protection?

    Filing for chapter 11 bankruptcy protection simply means that a company is on the verge of bankruptcy, but believes that it can once again become successful if it is given an opportunity to reorganize ...
  2. Investing Basics

    The Dirt On Delisted Stocks

    Listed securities are "the cream of the crop". Find out how a firm can lose that status and why you should be wary.
  3. Retirement

    Bankruptcy Protection For Your Accounts

    Will the plan assets you've worked hard for be safe if you experience a personal financial crisis?
  4. Options & Futures

    Facing Co-Op Bankruptcy

    Co-op investors can often be penalized for other people's actions. Read on to learn about the most common types of co-op default.
  5. Credit & Loans

    How To Survive A Bankruptcy Filing

    Learn how to make filing for bankruptcy less painful so you can successfully rebuild your financial life.
  6. Investing

    Does a shareholder lose all of their equity once a Chapter 11 bankruptcy is filed by the company?

    When a company files for Chapter 11 bankruptcy, the management of the company is still in charge of the daily operations. That said, significant business decisions, especially those pertaining ...
  7. Insurance

    Life After Bankruptcy

    Find out what you have to look forward to after filing for Chapter 7 or 13.
  8. Options & Futures

    Should You File For Bankruptcy?

    Find out how to determine whether this option will help or hurt your financial situation.
  9. Bonds & Fixed Income

    An Overview Of Corporate Bankruptcy

    If a company files for bankruptcy, stockholders have the most to lose. Find out why.
  10. Entrepreneurship

    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 the stage of reorganization and must sell off any un-exempt assets to ...

You May Also Like

Hot Definitions
  1. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  2. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  3. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  4. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
  5. Special Administrative Region - SAR

    Unique geographical areas with a high degree of autonomy set up by the People's Republic of China. The Special Administrative ...
  6. Annual Percentage Rate - APR

    The annual rate that is charged for borrowing (or made by investing), expressed as a single percentage number that represents ...
Trading Center