| absolute priority rule | Establishes priority of claims under liquidation.
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| financial distress | Events preceding and including bankruptcy, such as violation of loan contracts.
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| liquidation | Termination of the firm as a going concern. Liquidation involves selling the assets of the firm for salvage value. The proceeds, net of transaction costs, are distributed to creditors in order of established priority.
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| prepackaged bankruptcy | Bankruptcy arrangements are worked out before the formal filing.
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| private workout | Financial restructuring takes place in lieu of formal bankruptcy.
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| reorganization | Financial restructuring of a failed firm. Both the firm's asset structure and its financial structure are changed to reflect their true value, and claims are settled.
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