Is It A Good Idea To Finance A Bankrupt Company?

[Good-Guy]

There are many experts who have defined the term "bankruptcy". When we read the word "Bankrupt", we get the idea that a person or a business organization was doing pretty good in the previous stages of its business, but due to some unfavorable financial conditions, the company became poor. In simple words, the easiest definition of bankruptcy is a total inability of an individual or a firm to pay off their loans or any kind of debts that are binding on the company. When a company files for bankruptcy, they tend to declare a legal statement in the court that they would no longer be able to pay the debts and they would become defaulter in the process.

There are many companies that went bankrupt during the Covid-19 pandemic due to extreme recession faced by the world economy and only a very small number of companies managed to survive. Most of the companies were quite big ones. However, I have always wondered if it would be a good idea to think about investing in bankrupt companies. In the past, there have been many instances when the bankrupt companies actually came back into the market and recovered really well in an exceptional way. What do you think?

 

[Kingsley]

This is indeed a very interesting topic and it requires some brainstorming, infact as for me I believe that whatever is what doing should be done very well. Hence if one is having the intention of acquiring a company that has liquidated an became bankrupt in the process then you must realise you are not just renting a new place, or like I will like to put it economically, you are not just going to acquiring a new property in this case asset, but you also going to carry a negative balance from the asset so one must have done enough research as to why the previous organization became bankrupt and what led to it becoming liquidated.

Then one should endeavour never to make such mistakes, and try as much as possible to get experts to look into the history of the company and look out for all their flaws and see how they could be corrected before making any further move.

When all that face is completed then one can take the bold step to acquire the place as it seem to me that the place will be sold at a favourable price, since the money will be used to settle up their debts.

 

[Alexandoy]

In our culture a bankrupt company is a bad luck which means you should not touch it and let it be forgotten. Usually the owners of the bankrupt company would dispose of the assets and divide it among the owners. I see the logic in that bad luck tag not really for the superstition,. To think that the company went down means there is a good reason for it to go bankrupt. You can check the details of the aftermath why the business was closed. There may be dwindling customer accounts or maybe lack of supplies and shortage with the cash flow that collections were not met. If you sum up all the reasons I guess you will come to the decision that starting up a new business is much better than reviving a dead business.

 

[Yusra3]

It is mostly the casethat lending cash to the insolvent entity is a task full of risks which requires meticulous research elaborations. Bankruptcy filing is an inevitable sign of the business’s demise which is characterized by sacking of products/services, enduring debts, fraudsters, amongst other problems. Therefore, an investment carries with it the risk of being totally wiped out. Nevertheless, a bankrupt business may hold some invaluable assets, such as its intellectual property or the same company saved once before through restructuring. For those who are willing to take huge risks in exchange for big potential rewards, these kind of investors may want to lend money. The whole thing should be pretty much considered carefully and assuming risks.