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Will CIT Group Survive Chapter 11 Bankruptcy?

Posted By admin || 6-Nov-2009

After filing Chapter 11 bankruptcy on Sunday, CIT Group is hoping that it will fair better than previous financial companies who have filed bankruptcy.  According to an article in the Star-Telegram, most financial companies who file for bankruptcy are usually liquidated or sold.

The article said:

"But the real test will come from CIT customers, who could decide to take their business elsewhere... Just as a bank would fail if all of its depositors tried to get money out at the same time, CIT wouldn't be able to survive if too many of its customers close their accounts. Some have already been pulling their business in recent months as CIT struggled for survival, but it's still too early to know how many will remain."


CIT Group has several factors working to its benefit, 1) Chapter 11 bankruptcy will allow the company to reduce its debt while continuing to operate normally, 2) if CIT Group's bankruptcy plan is approved it could eliminate $10 billion in debt and 3) due to a difficult lending environment, its customers may not have many other options when it comes to securing credit.  Also, CIT Group provides certain types of financing this difficult to get elsewhere. But despite what happens one thing is for sure, once CIT Group emerges from bankruptcy they will be a much smaller company.

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