When a firm attempts to persuade its creditors to temporarily freeze their claims while it undertakes to reorganize and rebuild its operations more profitably,this form of bankruptcy is called:
A) Reorganization bankruptcy
B) Liquidation bankruptcy
C) Partial bankruptcy
D) Organizational bankruptcy

Question

Quizplus · Accepted Answer

Reorganization bankruptcy, also known as Chapter 11 bankruptcy in the United States, allows a company to restructure its debt while continuing to operate, rather than liquidating its assets to pay off creditors. This process often involves negotiations with creditors to temporarily freeze their claims and reach a new agreement for repayment, allowing the company to focus on rebuilding its operations more profitably.

When a Firm Attempts to Persuade Its Creditors to Temporarily