This section is from the book "Business Finance", by William Henry Lough. Also available from Amazon: Business Finance, A Practical Study of Financial Management in Private Business Concerns.
When a business enterprise is unable to meet its debts and is known to be insolvent, four courses of action are open:
1. The owners of the bonds and other obligations and their creditors may agree voluntarily to a "readjustment" or settlement of their claims. This can be done only when all the creditors are reasonable and have considerable faith in the management of the enterprise. In that case, they may prefer, for their own sakes, that the situation should be kept out of the courts and out of public records and that the business should go on with as little disturbance as possible.
3. The individual, the partnership, or the corporation owning the enterprise may be adjudged a bankrupt, and a receiver in bankruptcy may be appointed to dispose of the assets and distribute the proceeds.
4. The corporation may secure the appointment of a receiver in equity whose function is to carry on the business and at the same time assist, so far as he can, in working out a generally satisfactory plan of reorganization.