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> Bankruptcy seems quite appropriate.

Hmm... Would not they just file for a Chapter 11 bankruptcy, restructure their debts (i.e., write those pesky $125 payments off), then emerge in a better shape than they were?

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That's not how bankruptcy works. The court and trustee divide the assets across creditors according to debt seniority.

(i.e., write those pesky $125 payments off)

What does that mean? As far as I know, you can't just announce that you're "writing off" debts and have them magically disappear.

You sell the company at a low price to a friend and pay out the low sum to the plaintiffs. This would need approval under chapter 11, I guess, and if you sell the company it includes the debt, so they'd have to be tricky about it and just sell the meat or the milk, not the whole cow. Ironically, this invariably means selling the customer data (but also existing contracts and what not). IANAL

The bankruptcy judge and trustee wouldn't approve an asset sale at significantly less than fair market value.

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