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Debt Relief – Insolvency – Bankruptcy Information » Bankruptcy Help » Why does filing for Chapter 11 bankruptcy help to facilitate the sale of a company?

Why does filing for Chapter 11 bankruptcy help to facilitate the sale of a company?

I have noticed that some companies, when they have an offer to be purchased by another company, will voluntarily file for Chapter 11 bankruptcy in order to “facilitate the sale” of the company. Why would they do this? How does this help to “facilitate the sale”? It also seems that by filing for chapter 11, it opens the company up to open bidding. Wouldn’t this make the sale to the company with the original offer more complicated?

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One Response to "Why does filing for Chapter 11 bankruptcy help to facilitate the sale of a company?"

  1. Spock (rhp) says:
    ah — but the bk filing extinguishes all debts of every description that aren’t part of the sale.

    the sale would need to be approved by the court, of course, and bidding might be required, etc. but the winning bidder would take the assets bid for free and clear of any and all claims for anything that happened in the past — employment discrimination, pollution, etc.

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