A process designed to revive a financially troubled or bankrupt firm. Reorganization involves the restatement of assets and liabilities, and communication with creditors in order to make arrangements for maintaining repayment.
Reorganization is an attempt to extend the life of a company facing bankruptcy through special arrangements and restructuring in order to minimize the possibility of past situations reoccurring. It sometimes involves issuing new securities to replace old securities. Liquidation and formal reorganization may be done by bankruptcy. Bankruptcy is a legal proceeding, and can be done voluntarily, with the corporation filing the petition, or involuntarily, with the creditors filing the petition.
