Business / Taxes / Bankruptcy: Bankruptcy means being insolvent, or unable to pay your debts. In that case, you can file a bankruptcy petition to seek a legal resolution. Chapter 7 bankruptcy, which allows you to discharge your unsecured debts but may result in your losing your home, car, or other secured debt, is available only to those whose earn less than the median for their state or qualify because of special circumstances. With Chapter 11 bankruptcy, also called reorganization bankruptcy, you work with the court and your creditors to repay debt over three to five years. However, some debts are not reduced by a declaration of bankruptcy, including past due federal income taxes, alimony, and higher-education loans. Similarly, when you hear that a company is reorganizing or is 'in Chapter 11,' it means it has filed for bankruptcy.
Business / Finance / Bankruptcy View: The argument that expected bankruptcy costs preclude firms from financing entirely with debt. MORE
Business / Finance / Bankruptcy Cost View: The argument that expected indirect and direct bankruptcy costs offset the other benefits from leverage so that the optimal amount of leverage is less than 100% debt financing. MORE