Chapter 7

What Does Chapter 7 Mean?
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

Absolute Priority
Bankruptcy
Chapter 11
Chapter 13
Chapter 15
Cramdown
Discharge In Bankruptcy
Distressed Securities
Prepackaged Bankruptcy
More Related Terms

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