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 to bankruptcy.

Question

Quizplus · Accepted Answer

In a Chapter 7 bankruptcy, a trustee is appointed to take control of the firm's assets and liquidate them to pay off creditors. This is done in an orderly and fair manner, and the firm is typically dissolved after all assets have been sold and debts have been paid. The other options are incorrect: A is referring to Chapter 11 bankruptcy, C is incorrect because a firm can file for Chapter 7 voluntarily, D is incorrect because administrative costs are paid first, and E is incorrect because issuing new shares of stock is not typically part of Chapter 7 bankruptcy proceedings.

Which One of the Following Statements Is Correct Concerning a Chapter