Statute Fixed by law, with the citation and effective date. Research Drawn from a published study. Assumption A CRAGSI-calibrated estimate, anchored to the research and editable in the tools where it matters most.
Runway & Distress Diagnostic
The diagnostic projects month-end cash with revenue compounding at your monthly growth rate and operating expenses held flat. Runway is the point where projected cash reaches zero. The board decision deadline is the point where cash falls to the reserve an orderly wind-down needs: final payroll, accrued paid time off (PTO), professional fees, and, where the federal Worker Adjustment and Retraining Notification (WARN) Act applies, up to 60 days of pay.
The distress score starts from runway and adjusts for past-due payables, insider support, time since the last priced round, secured debt relative to cash, and, for software and fintech companies, the burn multiple (net burn divided by net new annual recurring revenue). The score maps to five bands, from Stable to Critical. Recovery paths are ranked by rules that weigh the same inputs.
Creditor Settlement Modeler
Each creditor class carries an indicative out-of-court settlement range, expressed in cents on the dollar of the claim a bankruptcy court would allow. The ranges sit between two anchors: the liquidation alternative, where unsecured creditors usually receive little or nothing, and small-company chapter 11 outcomes. A creditor that compares an offer against those alternatives, net of time and cost, has reason to accept a credible offer inside the range.
Landlord claims are measured against the cap in section 502(b)(6) of the Bankruptcy Code, using the time approach the Southern District of New York adopted in 2023. Secured claims settle against collateral value, with any deficiency treated as unsecured. Claims at or below the convenience threshold are paid in full.
Recovery Waterfall
The waterfall applies realization rates to each asset under three scenarios, deducts the cost of each process, and distributes what remains in priority order: secured debt, priority wages and taxes, general unsecured claims pro rata, subordinated claims, simple agreements for future equity (SAFEs) and preferred stock, and finally common stock. Process costs come off the top, which mirrors the carve-outs secured lenders commonly agree to. An assignment for the benefit of creditors (ABC) follows state-law priorities, which the model approximates with the bankruptcy order.
Benchmark and assumption register
This table reads directly from the file the calculators use, so it always matches the live tools.
Sources
- Arturo Bris, Ivo Welch, and Ning Zhu, “The Costs of Bankruptcy: Chapter 7 Liquidation versus Chapter 11 Reorganization,” Journal of Finance 61, no. 3 (2006): 1253–1303. Abstract.
- S&P Global Market Intelligence, LCD, “From Drexel to the Credit Crunch: Recoveries via LossStats” (April 2017). PDF.
- Judicial Conference of the United States, Revision of Certain Dollar Amounts in the Bankruptcy Code (effective April 1, 2025), Federal Register document 2025-02207. PDF.
- 11 U.S.C. § 502(b)(6); In re Cortlandt Liquidating LLC, 648 B.R. 137 (Bankr. S.D.N.Y. 2023). Discussion: Jones Day (2023).
- 11 U.S.C. § 326(a) (chapter 7 trustee compensation); 11 U.S.C. § 507(a) (priorities). Text of § 507.
- 26 U.S.C. § 6672 (trust fund recovery penalty). Text.
- U.S. Department of Labor, Worker Adjustment and Retraining Notification (WARN) Act. Overview.
- Y Combinator, Post-Money SAFE, Section 1(d), Liquidation Priority. Documents.
- American Bankruptcy Institute, Subchapter V Task Force Final Report (2024). PDF.
- “Chapter 11’s Best Alternative? The Case for Composition Agreements in 2025,” Hilco Global. Article.
Large-company recovery data describe rated issuers and serve here as directional anchors. Venture-backed companies differ in asset mix and capital structure, which is why the settlement ranges are labeled as assumptions and why CRAGSI tests them against the facts of each engagement.