DEFINITION of 'Quick-Rinse Bankruptcy'

A bankruptcy proceeding that is structured to move through legal proceedings faster than the average bankruptcy. The term "quick-rinse bankruptcy" first emerged during the credit crisis that started in 2008 and was used to describe the planned bankruptcies of U.S. automotive giants Chrysler and General Motors. In order for quick-rinse bankruptcies to be effective, interested parties must negotiate prior to the proceedings. These negotiations take place between the government, debtholders, unions, shareholders and other parties in order to prevent filings by these parties in court that would otherwise clog up the process.

BREAKING DOWN 'Quick-Rinse Bankruptcy'

Pre-negotiated bankruptcies arose during the credit crisis of 2008 due to the perceived impact that the Chrysler and GM failures would have on the economy. It was argued that an untimely bankruptcy would result in massive layoffs and further stunt economic growth. As an example of a normal bankruptcy for an automotive company, one should look at the bankruptcy of Delphi Corp., which went into bankruptcy in 2005 and still had not emerged by 2009.

RELATED TERMS
  1. Prepackaged Bankruptcy

    A plan for financial reorganization that a company prepares in ...
  2. IRS Publication 908

    A document published by the Internal Revenue Service (IRS) that ...
  3. Technical Bankruptcy

    The state of a company or person who has defaulted on a financial ...
  4. Voluntary Bankruptcy

    A type of bankruptcy where an insolvent debtor brings the petition ...
  5. Bankruptcy Abuse Prevention And ...

    Legislation enacted by President George W. Bush in 2005 that ...
  6. Involuntary Bankruptcy

    A legal proceeding in which a person or business is requested ...
Related Articles
  1. Small Business

    Taking Advantage Of Corporate Decline

    A bankrupt company can provide great opportunities for savvy investors.
  2. Taxes

    How To Survive A Bankruptcy Filing

    Learn how to make filing for bankruptcy less painful so you can successfully rebuild your financial life.
  3. Financial Advisor

    Should You File For Bankruptcy?

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

    Changing The Face Of Bankruptcy

    A 2005 law attempts to unmask fraudulent debtors and still save those who are struggling. Will it affect you?
  5. Taxes

    Bankruptcy Consequences

    You've done the deed and are out from under your debts – or embarked on a repayment plan. What consequences can you expect and how long will recovery take?
  6. Small Business

    7 Bankrupt Companies That Came Back

    Bankruptcy is often the end of a company – until it isn't.
  7. Insurance

    Personal Bankruptcies Cut Almost in Half After Obamacare

    Access to health insurance many have saved many Americans from going broke.
  8. Investing

    5 Energy Companies Crushed by Low Oil in 2016

    Oil companies globally are at risk of slipping into bankruptcy, and many of these businesses could disappear, leaving the sector worse off than in 2008.
  9. Retirement

    How Does Bankruptcy Affect Your IRA?

    Since 2005, money in your IRA can be protected if you are forced to file for bankruptcy.
  10. Personal Finance

    Millionaires With The Most Bankruptcies

    These celebrities made a lot and lost a lot - sometimes several times over. Find out who they are.
RELATED FAQS
  1. How will bankruptcy affect my ability to get credit in the future?

    Learn how filing bankruptcy affects your ability to obtain credit in the future, and find out how long a bankruptcy stays ... Read Answer >>
  2. What are the financial consequences of filing for bankruptcy?

    Learn about the various consequences, both positive and negative, that you can expect to result from your filing for bankruptcy. Read Answer >>
  3. How do I find a good personal bankruptcy lawyer?

    Read how to find a good personal bankruptcy lawyer, and learn how much you can expect to pay for services if you are considering ... Read Answer >>
  4. Will filing bankruptcy stop an eviction?

    Learn about how filing bankruptcy can affect an eviction process, and find out what recourse your landlord has if you file ... Read Answer >>
  5. 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 >>
Hot Definitions
  1. Interest Expense

    The cost incurred by an entity for borrowed funds. Interest expense is a non-operating expense shown on the income statement. ...
  2. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
  3. Pro-Rata

    Used to describe a proportionate allocation. A method of assigning an amount to a fraction, according to its share of the ...
  4. Private Placement

    The sale of securities to a relatively small number of select investors as a way of raising capital.
  5. AAA

    The highest possible rating assigned to the bonds of an issuer by credit rating agencies. An issuer that is rated AAA has ...
  6. Backward Integration

    A form of vertical integration that involves the purchase of suppliers. Companies will pursue backward integration when it ...
Trading Center