Reading: (CU3 M3) What Every Investor Should Know: Corporate Bankruptcy
Read the Securities and Exchange Commission's material on corporate bankruptcy. When a corporation is unable to pay its debts, it is said to be insolvent. In the United States, bankruptcy laws help to protect creditors while allowing the debtor to start over. Note that corporations in the United States may reorganize and reach agreements with creditors as to how debts will be paid, if at all. Additionally, a corporation may just stop operating and liquidate all of its assets to satisfy a portion of its debts. Be aware of the distinctions between the two major types of bankruptcy.
Please read United States Securities and Exchange Commission’s “What Every Investor Should Know: Corporate Bankruptcy” (Links to an external site.)Links to an external site. (PDF)