So when a railroad files for Chapter 7 bankruptcy, meaning the company is going to be liquidated how will the creditors go about getting their money back when they sell their assets? Is it by auction or whoever wants it(First come, first served basis)? And after everything has been dealt how will the railroads who gained the assets go about. What if there's still debt that hadn't been paid off yet? Will he railroads who acquired their assets be forced to pay up to relinquish the remaining debts, the creditors just figure something out or let it go or will the gov't cover it?
Failing Railroads
- Thread starter Kris94
- Start date
I'd imagine it's like any business, which I'm no expert on but... Any assets owned outright and bought by another party become the property of the new owner. Assets with liens against them (not yet "paid for in full") are subject to that lien. Lien holder will take possession and sell to recoup the debt. Where and how money moves around is probably under court jurisdiction.
That's all assuming a buyer isn't looking to keep the railroad going as a new company. In that case it would get a bit more hairy. In any case, being transportation companies means that the government has a say, and I'd imagine that trumps every other rule out there.
That's all assuming a buyer isn't looking to keep the railroad going as a new company. In that case it would get a bit more hairy. In any case, being transportation companies means that the government has a say, and I'd imagine that trumps every other rule out there.
I think it is doubtful that a railroad would file a petition under Chapter 7. More likely it would be a Chapter 11 filing due to the quantity of physical assets involved. This link to the US Code, and follow up searches in Google will tell you much more than you ever wanted to know on this subject. http://www.lawserver.com/law/country/us/code/us_code_title_11_chapter_11_subchapter_iv Of course, it would tell you nothing about liquidations or reorganizations in other countries.
Bernie
Bernie
Bankruptcy procedings such as this are complicated and usually end up breaking up the assets of the insolvent RR and allowing others to purchase them. This is what happened to the RI, of fragrant memory. The assets, track, real estate, rolling stock, etc., are auctioned under the supervision of the bankruptcy court and taken over by management that believes they can use them profitably. This is actually a good thing, as it promotes profitability. But since that is now thought to be a bad thing, Lord knows what the outcome would be under the "too big to fail" doctrine, as Euphod points out.
Bernie
Bernie
The big bailout by the US government of the Penn Central gave us Conrail.
They couldn't be bothered with the NYOW or Rutland because they were too small, and the Rock Island was considered obsolete because there are so many competing lines in the region. I suppose it has to do with who has the money and the biggest lawyers at the time of the filing.
John
They couldn't be bothered with the NYOW or Rutland because they were too small, and the Rock Island was considered obsolete because there are so many competing lines in the region. I suppose it has to do with who has the money and the biggest lawyers at the time of the filing.
John
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