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An entity may have financial issues so significant that it does not expect a Court would be able to affirm its future feasibility as a going concern (i.e., the entity does not have any value beyond its identifiable net assets). Upon the filing of a petition under Chapter 7 of the Bankruptcy Code, the Court assigns an independent trustee to manage the business and the process of liquidation. This is a significant difference from a petition under Chapter 11 where the debtor generally retains at least some of the rights to control its own assets. The trustee will usually discontinue the entity's operations to conserve its remaining resources and sell its assets to the highest bidder using the proceeds of sale for the benefit of the creditors. Secured creditors generally will receive a return of their collateral. Administrative claims are usually paid first, and any remaining proceeds are paid to the remaining creditors according to the provisions of the Bankruptcy Code. Upon completion of the process, the debtor receives a discharge from its prepetition debts.
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