How Blockchain can help Bankruptcies and firms going into Chapter 11

Chapter 11 in the USA has been used by firms such as General Motors, K-Mart, and United Airlines, where the bankruptcy court is appointed to oversee the restructuring of a firm’s debts

LATAM, Latin American’s largest airline, Advantage Rent A Car and recently Hertz rental car  filed for Chapter 11. Hertz have laid off 10,000 staff. Carl Icahn is now nursing heavy losses as the owner of 39% of the company which at the end of 2019 was valued at $750m. Yet days before Hertz gave $16million in bonuses to staff!

The restaurant business Le Pain Quotidien has filed for Chapter 11 bankruptcy

Chapter 11 is time consuming and very expensive as all the debtors various professional advisors fees need paying, typically 10-15% of companies going in to Chapter 11 survive

Coresight Research, monitors retail trends claim the number of shops closing in 2020 will rise from 8,000 it predicted in Jan to 25,000

“bankrupt” derives from banco rotto, – medieval Italian, for merchants who did not pay their debts had their stalls smashed and destroyed to stop them selling goods

According to Statista in Italy 5% of companies were likely to go bust this has increased typically by 50% due to Covid-19

According to The National Law review blockchain technology can help automate several time-consuming chores in chapter 11 bankruptcies by eliminating the need for middlemen performing these tasks, specifically vote tabulation, claims administration, and auctions.

Blockchain would help debtors if they had better access to a company’s financial position and could TRUST the information by being held on an immutable ledger

As the Institute of Chartered Accountancy for England and Wales said “ blockchain provides clarity over ownership of assets and existence of obligations, and could dramatically improve efficiency”.

If you Google bankruptcy, firms going into administration there is not very much up to date information as government handouts and loans have arguably delayed the hard decisions that look likely to have to be made i.e. an escalation in bankruptcies

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