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at informal remedies are available to firms in financial distress? 25 8 Copyright 169。 20xx Harcourt Inc. All rights reserved. ?Workout: Voluntary informal reanization plan. ?Restructuring: Current debt terms are revised to facilitate the firm’s ability to pay. ?Extension: Creditors postpone the dates of required interest or principal payments, or both. Creditors prefer extension because they are promised eventual payment in full. Informal Bankruptcy Terminology (More...) 25 9 Copyright 169。 20xx Harcourt Inc. All rights reserved. ?Composition: Creditors voluntarily reduce their fixed claims on the debtor by either accepting a lower principal amount or accepting equity in lieu of debt repayment. ?Assignment: An informal procedure for liquidating a firm’s assets. Title to the debtor’s assets is transferred to a third party, called a trustee or assignee, and then the assets are sold off. 25 10 Copyright 169。 20xx Harcourt Inc. All rights reserved. ?Chapter 11: Business reanization guidelines. ?Chapter 7: Liquidation procedures. ?Trustee: ? Appointed to control the pany when current management is inpetent or fraud is suspected. ?Used only in unusual circumstances. Describe the following terms related to . bankruptcy law: (More...) 25 11 Copyright 169。 20xx Harcourt Inc. All rights reserved. ?Voluntary bankruptcy: A bankruptcy petition filed in federal court by the distressed firm’s management. ?Involuntary bankruptcy: A bankruptcy petition filed in federal court by the distressed firm’s creditors. 25 12 Copyright 169。 20xx Harcourt Inc. All rights reserved. ?Informal Reanization: ?Less costly ?Relatively simple to create ?Typically allows creditors to recover more money and sooner. What are the major differences between an informal reanization and reanization in bankruptcy? (More...) 25 13 Copyright 169。 20xx Harcourt Inc. All rights reserved. ?Reanization in Bankruptcy ?Avoids holdout problems. ?Due to automatic stay provision, avoids mon pool problem.