If I buy a product from a company that has closed where (or for who) does this money of the sale go?
In: Economics
When J.Crew files for bankruptcy, there is something formed called the “estate.” The management team, with the help of advisors, manage the estates until it can determine an exit to the bankruptcy (sale, liquidation, reorg). It’s a concept known as “Debtor-in-Possession,” and some people have problems with it for perhaps obvious reasons.
So let’s say you go into a J.Crew store while in bankruptcy. That cash you paid for the item becomes property of the estate. The company will have gotten approval from the court to pay “ordinary course” business expenses, such as payroll and inventory, so some of it will go there. Once those are paid, it’ll go to “restructuring expenses,” such as law firms and financial advisors and certain expenses which are given top priority status. Whatever cash is left after that will go to people the company owed money to prior to filing, in order of their seniority. So a secured lender will get first, then a “junior” lender, “unsecured” creditors etc. Remember that ownership of the company itself is also in play, so it’s not just this cash amount that everyone fights over.
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