Credit · Core
Chapter 7
Chapter 7 is US liquidation bankruptcy — a trustee sells assets and pays claims in priority; the going concern is over.
Definition
A trustee takes control, sells assets, and distributes under the Code. No DIP turnaround story. Recoveries are liquidation values minus costs. Convert from 11 to 7 when the plan dies.
Why it matters
It is the hard floor for recovery analysis. Many ‘11’ filings are liquidation in stages.
Case
A failed SPAC target files 7. Cash on the sheet is eaten by claims and fees; common is zero; some vendors never ship again. There was no stub.
How to read it
Asset quality, liens, and wind-down costs. If 11 is just a slower 7, price it as 7.
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