Which one of the following statements is correct concerning a Chapter 7 bankruptcy?
A)A firm reorganizes its operations in an effort to return to being a viable concern.
B)A trustee will assume control of the firm's assets until those assets can be liquidated.
C)Chapter 7 bankruptcies are always involuntary on the part of the firm.
D)The claims of creditors are paid prior to the bankruptcy administrative costs.
E)The firm generally issues new shares of stock prior to coming out of bankruptcy.

Question

Quizplus · Accepted Answer

In a Chapter 7 bankruptcy, a trustee is appointed to liquidate the assets of the firm and distribute the proceeds to creditors. This process is not voluntary, as it is typically initiated by the firm itself or by its creditors. The claims of creditors have priority over administrative costs, so they are paid before any fees associated with the bankruptcy process. The issuance of new shares of stock is not typical in a Chapter 7 bankruptcy.

Which One of the Following Statements Is Correct Concerning a Chapter