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    Costs related to bankruptcy; factors leading to bankruptcy

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    A) What are bankruptcy costs and what costs does it not take into consideration?

    B) A company can suffer from increased expenses if it experiences financial difficulties even though it does not go bankrupt. Why?

    Please fully elaborate on definitions and explanations.

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    https://brainmass.com/business/financial-distress-and-bankruptcy/costs-factors-bankruptcy-383496

    Solution Preview

    a.) What are bankruptcy costs and what costs does it not take into consideration?

    Bankruptcy costs are only those administration expenses necessary to file, conduct and close a bankruptcy. It is easier to understand a Chapter 7 (liquidation) bankruptcy where all the assets and liabilities are cancelled, sold or otherwise disposed of.

    Even Chapter 7 has differing rules because bankruptcy filings conform to state law, which tend to vary from state to state. For example, a homestead exemption is very common in which the court will not force the sale of ...

    Solution Summary

    The 370 word solution explains the costs in the various types of bankruptcy filings, but also provides a listing of types of actions that a company losing money can initiate to try to avoid filing bankruptcy.

    $2.49

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