What does it mean when a huge business declares bankruptcy? Contrary to popular belief, it doesn’t necessarily indicate that the business will close. Bankruptcy protection seeks to avoid closure, if possible.
Individuals and small businesses claim bankruptcy all the time. Simple put, bankruptcy is a legal status stating that a person or entity cannot possibly pay off the debts they owe to creditors. Of course, not all debts can be dispelled through bankruptcy and not everyone qualifies.
When it comes to large corporations, Chapter 11 bankruptcy offers the business the chance to restructure and hopefully recover from past financial mistakes. The business continues to operate but all major financial decisions must be approved by the bankruptcy court.
There are some businesses that are so large and make so much money that it seems impossible they could be struggling under the weight of debt. But just because a company is making money, it doesn’t mean they’re financially stable. Ahead, check out the most high-profile and shocking bankruptcies in the business world from smallest to largest.
Total assets pre-bankruptcy: $33.3 billion
Industry: Brokerage services
This New York-based financial services company had about $33 billion in assets – but scandal struck. CEO and chairman Phillip R. Bennett was accused of hiding $430 million worth of bad debts from auditors and was paying those bad loans with company funds. The company filed for bankruptcy in 2005 and Bennett was sentenced to 16 years in federal prison.
Next: Financial Corp. of America