Where does a company’s wealth go if they go bankrupt?
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Bankrupt doesn’t mean you have no wealth. It means you don’t have enough cash on hand to pay that month’s loan payments.
When this happens, the lenders can demand that you liquidate some of your wealth into cash and repay using that, with varying success rates.
There’s also Chapter 11 bankruptcy which allows you to keep most of your assets because the lenders would get more money that way than if you liquidated them.
More like, “where did their money go to cause the bankruptcy?”
Most common answer – CEO and CFO paychecks.
A bankrupt company’s wealth goes to its creditors (the people it owes money to). Roughly in order it goes to the following groups of people:
– (1) Paychecks to employees for work already performed
– (2) Repaying money borrowed from the bank
– (3) Paying bills like rent, electricity, Internet
– (4) Paying suppliers for goods and services that were delivered but not paid for
– (5) Repaying money borrowed from its customers
– (6) The shareholders of the company
Usually by the time you get to (6) the money has all gone to satisfy other groups’ claims. This can also vary somewhat depending on jurisdiction, the type of company, and the specifics of particular case.
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