Even though bankruptcies are uncommon, their importance far outweighs their frequency.
A few concepts that you should be aware of are that:
1. There is a priority of claims
2. The Fulcrum Security is an important concept. In the words of Nicholas Ortiz, a Boston based bankruptcy lawyer:
A fulcrum is a lever. A partially-in-the-money group of claims has leverage over a bankruptcy plan because they are often the only class of claims that has a vote that matters. The existence of a fulcrum security usually means that a senior class of debt is being paid in full.
I would encourage you to read the rest of his 3 paragraph article describing the concept.
I would also encourage you to read this piece by Marty Whitman and the nice people at Third Avenue Funds. Also, it’s shorter and much easier to get through than the reading on Creditworthiness that is due today.