16. Potential problems in reorganization and their solutions Reorganization through workout plans are informal and less costly than formal bankruptcy filings, but informal reorganization also leads to certain problems. Consider the following case: Klose Corp. is worth $15 million as an operating company. The company is in financial distress, and if it were liquidated, the company's value would only be $8 million. Messi Inc. owns a 30% stake in Klose. To reduce the total value of the company's assets, Messi buys assets from Klose at a lower price than the true market value of the assets. The loss due to the difference between the market value of Klose's assets and the price paid by Messi is left for creditors to bear. Klose Corp.'s situation represents the: Holdout problem Fraudulent conveyance problem Common pool problem Federal bankruptcy law helps deal with the problems mentioned in the preceding case. The Bankruptcy Act protects creditors from unjustified transf of property by a firm in financial distress through