If I buy a product from a company that has closed where (or for who) does this money of the sale go?
In: Economics
It depends. When a company files for bankruptcy, it is either to say “let’s re-negotiate this debt, here’s my plan to get the company back on track, and we can start fresh” (Chapter 11). or “There’s no way I can reasonably pay back all of this debt so let’s work something out, where I pay you whatever I got and can get from this business.” (Chapter 7).
The former (Chapter 11) means that the company gets the money, which they can use to pay down their debt or use it for something else (although the debt owners would probably only agree to the restructuring plan if the company was forced to meet certain payments at certain times. If they don’t agree with your plan, they can force a Chapter 7. This negotiation takes place in what’s called a Bankruptcy Court).
For the latter (Chapter 7), any amount of money that can be squeezed from the business (either by sales of products or selling assets like warehouses) goes straight to the debt owners. Think of when you lose at Monopoly. Everything owned by the business has to be sold (or in other words, liquidated) to put as much of a dent as possible in the debt you can never re-pay anyway.
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