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Friday, June 15, 2012 8:13:47 PM
For example, secured debt would be loans issued by banks or institutions based upon the value of a specific asset. Whatever assets and residual cash remain after all secured creditors are paid are pooled together to be paid to any outstanding creditors with unsecured loans: e.g. bondholders and preferred shareholders.
Chapter 11 bankruptcy can also be called rehabilitation bankruptcy. It's much more involved than chapter 7 as it allows the firm the opportunity to reorganize its debt and to try to re-emerge as a healthy organization. What this means is that the firm will contact its creditors in an attempt to change the terms on loans such as the interest rate and dollar value of payments. Like its cousin, chapter 11 requires that a trustee be appointed; however, rather than selling off all assets to pay back creditors, the trustee supervises the assets of the debtor and allows business to continue. It's important to note that debt is not absolved in chapter 11: the restructuring only changes the terms of the debt, and the firm must continue to pay it back through future earnings.
Read more: http://www.investopedia.com/ask/answers/190.asp#ixzz1xuW9PzIR
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