In the first of two videos on bankruptcy, Sal explains the liquidation process and its effects on investors. He reviews ways a company raises capital and presents a hypothetical issue: a company goes bankrupt and doesn't have the assets it originally assumed. Scholars consider the issue of asset allocation: Who gets the money? Using a balance sheet to illustrate the concepts, he explains the debt-holders hierarchy. Sal outlines the debt bucket system from senior secured debt to subordinated unsecured debt.