Quick-Rinse Bankruptcy

AAA

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.

INVESTOPEDIA EXPLAINS '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. Scrap Paper

    Stock certificates that have become worthless. When a company ...
  2. Bank Reserve

    Bank reserves are the currency deposits which are not lent out ...
  3. Tax Accounting

    Accounting methods that focus on taxes rather than the appearance ...
  4. Bankruptcy Trustee

    A person appointed by the United States Trustee, an officer of ...
  5. Bankruptcy Financing

    Financing arranged by a company while under the chapter 11 bankruptcy ...
  6. Liquidation

    1. When a business or firm is terminated or bankrupt, its assets ...
RELATED FAQS
  1. What options strategies are best suited for investing in the banking sector?

    The covered call option strategy allows investors to profit from the banking sector's stability and its track record for ... Read Full Answer >>
  2. What do mortgage lenders use the securitization food chain?

    The phrase "securitization food chain" was made popular by director Chris Ferguson in "Inside Job," a film about the 2007-2 ... Read Full Answer >>
  3. Can the Efficient Market Hypothesis explain economic bubbles?

    The efficient market hypothesis (EMH) cannot explain economic bubbles because, strictly speaking, the EMH would argue that ... Read Full Answer >>
  4. What role did junk bonds play in the financial crisis of 2007-08?

    Junk bonds were the at heart of the financial crisis of 2007-2008. Toxic assets related to the subprime housing market pushed ... Read Full Answer >>
  5. How important are fleet sales to an automaker's business?

    Fleet sales have been turning much more profitable with the recovery of the auto industry since the financial crisis of 2 ... Read Full Answer >>
  6. What role did securitization play in the U.S. subprime mortgage crisis?

    The securitization of subprime mortgages into mortgage-backed securities (MBS) and collateralized debt obligations (CDOs) ... Read Full Answer >>
Related Articles
  1. 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.
  2. Fundamental Analysis

    Carl Icahn's Investing Strategy

    Buying up failing investments and turning them around helped to create the "Icahn lift" phenomenon.
  3. Bonds & Fixed Income

    An Overview Of Corporate Bankruptcy

    If a company files for bankruptcy, stockholders have the most to lose. Find out why.
  4. Active Trading Fundamentals

    Finding Short Candidates With Technical Analysis

    Learn how to distinguish tops and bottoms in the equity market when short selling.
  5. Bonds & Fixed Income

    Taking Advantage Of Corporate Decline

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

    Understanding Subordinated Debt

    A loan or security that ranks below other loans or securities with regard to claims on assets or earnings.
  7. Stock Analysis

    Will American Airlines Fall Back To Earth In 2015?

    The airline industry enjoys blockbuster profits, and American Airlines Group has been a key beneficiary of the favorable trends that have lifted stocks.
  8. Investing

    What is Equity Financing?

    Companies that are short on cash may need financing to pay for short-term needs or long-term capital expenditures.
  9. Investing Basics

    The Dodd-Frank Wall Street Reform Act

    The Dodd-Frank Wall Street Reform and Consumer Protection Act, commonly called Dodd-Frank, was passed in 2010. The goal of the act is to prevent another great recession like that of 2008, which ...
  10. Stock Analysis

    What’s The Best Airline Stock In the Industry?

    With many airlines forced to seek bankruptcy protection, Southwest Airlines stands out as having consistently remained profitable throughout its history.

You May Also Like

Hot Definitions
  1. Fisher Effect

    An economic theory proposed by economist Irving Fisher that describes the relationship between inflation and both real and ...
  2. Fiduciary

    1. A person legally appointed and authorized to hold assets in trust for another person. The fiduciary manages the assets ...
  3. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  4. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  5. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
  6. Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. ...
Trading Center