How exactly is the fate of subsidiaries decided? Why aren't they all liquidated to pay the debts of the parent company?
Why aren't they all liquidated to pay the debts of the parent company?
They are not automatically liquidated because they might be worth more as a running company than as a liquidated one*1. In fact, as long the owner has no restrictions on when to liquidate it, a running company is worth at least as much as its liquidated version (because the moment the running company is worth less than the assets of the liquidated company, the owner can begin the liquidation).
Those companies are assets of the parent company, and (if nothing stops the bankruptcy process) in due time they will be sold to pay to creditors.
Typically its management will be closely monitorized by the people overseeing the bankruptcy process, and theoretically it could be decided to liquidate them if that is the way of getting the maximum value out of it. But in practice, if there are lots of debtors it is likely that some of them would not agree with that measure, and the risk of lawsuits by those debtors could stall that measure.
1 In fact, the usual reason to start any business is that you expect to get out of it more than you put into it.