prepackaged bankruptcy

Definition

prepack. Method of filing for company reorganization under Chapter 11 that is relatively cheaper, quicker, and more risk-free and hassle-free. It short-circuits the normal bankruptcy filing and out-of-court workout procedures. In a prepack, the management of the failed company negotiates with its major creditors the general terms of its bankruptcy plan and, after taking their and two-thirds of its shareholders' consent, files the plan with the bankruptcy petition. Employed usually when the significant creditors are few and the company is free from heavy contingent or disputed liabilities, it might take only 30 to 90 days instead of years to go into reorganization and come out clean.
Creditors normally agree to a prepack because they can recover more in this scheme than in a liquidation, and their claims are preserved and not washed out as in other types of bankruptcies. The management is usually allowed to retain an equity stake in the reorganized company and there may be associated tax benefits.

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You may find that your only option left is to take on a prepackaged bankruptcy and try to start all over.

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They didn't want to go through the long drawn out bankruptcy proceedings so they followed through with a prepackaged bankruptcy plan.

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Working with our major creditors we were able to negotiate a prepackaged bankruptcy that would guarantee business continuity and the repayment of 70% of our liabilities.

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