Restructuring in Bankruptcy

This chapter explores the different forms of bankruptcy in the United States and discusses the circumstances in which a company would use either of the two broad forms of corporate bankruptcy that are available under U.S. law. It also discusses asset sales prior to a bankruptcy filing. The Bankruptcy Act of 1978 is the main bankruptcy law of the United States. The reorganization process starts with the filing of a bankruptcy petition for relief with the bankruptcy court. The Bankruptcy Code provides for various committees to be formed to represent the interests of different claimholders before the court. Companies involved in a bankruptcy have to determine whether a sale of the entire company or an exit from bankruptcy as a reorganized business will yield the greatest return. Brian Betker estimates the present value of future taxes saved by restructuring through a prepackaged bankruptcy, as opposed to a workout, is equal to 3% of total assets.