This is absolutely legal under international banking rules.Some procedures must be respected and you have to know what to do and how.If their financial situation has changed or their home value has declined, they might not qualify for a new loan.
The most senior claims belong to secured creditors, who have collateral on loans to the business.
These lenders will seize the collateral and sell it—often at a significant discount, due to the short time frames involved.
If that does not cover the debt, they will recoup the balance from the company’s remaining liquid assets, if any. These include bondholders, the government (if it is owed taxes) and employees (if they are owed unpaid wages or other obligations).
Mortgage maturity refers to the date at which all agreed payments, as specified in your original mortgage paperwork, have been paid. Depending on the length of your loan term, and the type of amortization on your mortgage, you may or may not have completely paid off the mortgage at the date of maturity.
The boutique investment banker is the most important piece of the puzzle.
It gives the bank what it need to feel comfortable with the transaction.
The debts still exist in theory, at least until the statute of limitations has expired, but there is no debtor to pay them, so they must be written off in practice.
Assets are distributed based on the priority of various parties’ claims, with a trustee appointed by the Department of Justice overseeing the process.
Once the process is complete, the business is dissolved.
This is not the same as its debts being discharged, as happens when an individual files for Chapter 7.
To give you an idea of how an arbitrage loan is made here is an example.