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In a bankruptcy the Trustee takes control of the company’s assets and the unsecured creditors are stopped from making any further collection efforts.

Although the Trustee may continue operating the company for a short time it will ultimately cease operating and all of its assets will be realized for the benefit of the creditors. Sometimes no alternative course of action is available and the directors of a company have no choice but to consider a corporate bankruptcy.

The company may make a voluntary assignment into bankruptcy or a creditor may petition a reluctant company into bankruptcy. In certain circumstances secured creditors will benefit from a bankruptcy in that it may protect the value of their security from statutory claims.

A creditor may also petition a company into bankruptcy for the purpose of enabling the Trustee to investigate possible fraudulent transfers of assets.


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