Re: Musk is just following the example of his guru
If he claims for ch11 protection, can the creditors contest it based on his actions being wilfully negligent to the company's financial well-being?
They can try, but sadly it's a pretty common business tactic. Get enough secured creditors on-side, engineer a default and away you go. Unsecured creditors and shareholders get wiped out, debt gets converted to new shares, and then make bank when the company is flogged off. Usually the biggest challenge is engineering a materiel default so the company is no longer a going concern, unless it's restructured. Arguing it's a result of Musk's negligence would be difficult, but there are probably lawyers who'd give it a try in exchange for fees of course. Creditors that aren't part of the pre-packaged plan would have to pay those, and would just add to their losses.
I think Musk may have already been hinting in this direction, ie that he'd inherited a basket case that had been consistently losing money, had let costs spiral out of control, and restructuring is the only way forward. Yer honor. It's a process also already so widely abused that there's less of a reputation hit or bankruptcy stigma. Often the opposite, when you get away with it. It's one of the reasons why caution is required contracting with good'ol Delaware LLCs because it happens a lot, and if you're unsecured, that's just too bad. It's capitalism at it's finest. Also possibly not as bad as say, the UK, where our version is to send in the administrators, who extract all the value they can in fees, and move on to the next spot of corpse raiding.