A written tour of business bankruptcy and its alternatives We discussed the automatic stay from the perspective of a secured creditor in Installment #9 of this series.This time we pan the camera back and look at the automatic stay from a broader and more general perspective. It is sometimes said that the two primary objectives of chapter 11 are to maximize the going-concern value of the bankruptcy estate and to assure equality of distribution among similarly situated creditors. The automatic stay furthers both of these goals. It preserves going-concern value […]

A written tour of business bankruptcy and its alternatives Our prior installment discussed some of the basic things a secured creditor needs to know about Chapter 11. The automatic stay was one of them.  But, since we like to keep these things short (on the presumption that others also have short attention spans) we didn’t say all we want to say on the topic (in fact, this installment won’t satiate us either and we will continue to explain other aspects of the automatic stay in future installments). For now, we […]

A written tour of business bankruptcy and its alternatives Our last installment focused on what we called the “mundane” middle of a chapter 11 case. You can read it here. This time we discuss something a bit more exciting: confirmation. Summary Chronology Here is the basic chronology leading up to confirming a plan, for those of you with a short attention span or a need for immediate gratification: Debtor files the bankruptcy petition Debtor negotiates a plan with creditors (or their agents) Debtor drafts a plan and its disclosure statement Debtor […]

A written tour of business bankruptcy and its alternatives In our past few installments we’ve been approaching our topic in a more or less chronological manner, explaining what generally happens first, second, third, and so on. We think it useful to switch convention and spend this and the next few installments talking about things from the perspective of specific players. This time, we focus on the secured creditor. What/who is a secured creditor?  Examples include (there are other possibilities): The holder of a real estate mortgage A bank with a […]

A written tour of business bankruptcy and its alternatives In case you are hopping on board the bus in the middle of our tour, you may want to know that this installment looks at some of the more mundane stuff that happens after a Chapter 11 case is filed but before the end of the case.  We will discuss that in later installments. Before we let you out of the bus to look around at this stop, let’s review what we’ve already seen (and what you may want to go […]

A written tour of business bankruptcy and its alternatives Subsequent installments in this series will cover the concepts touched upon here in more detail.  We think it prudent, if not necessary, to at least throw some basic chapter 11 concepts on the table now, however, since they are so fundamental to any Chapter 11 case- regardless of which side of the table you sit on. The Automatic Stay Commencing a bankruptcy case triggers an “automatic stay,” which, with certain exceptions (carved out by §362(b)), operates as an injunction against actions […]

A written tour of business bankruptcy and its alternatives Companies in chapter 11 typically consider (or at least should consider) other options before ending up there. In fact, distressed businesses tend to follow a fairly predictable pattern, or lifecycle: denial, anger, bargaining, depression, and acceptance- – – No, those are the five stages of grief. In all seriousness, understanding how to cope with, counsel, or live through a distressed businesses situation is easier if you understand the typical lifecycle. You can think about the lifecycle of a chapter 11 debtor […]

A written tour of business bankruptcy and its alternatives In order to understand the options a financially distressed business (or its owners, creditors, or potential buyers) has, one has to understand the Bankruptcy Code. The Bankruptcy Code is contained in Title 11 of the U.S. Code and is divided into chapters. Chapters 1, 3 and 5 are “general” chapters, applicable in all cases: Chapter 1 contains definitions, defines who can be a debtor, describes the courts’ powers, and contains some other general rules. Chapter 3 governs “case administration,” which sounds […]

A written tour of business bankruptcy and its alternatives A typical commercial litigation case involves a judge, a plaintiff, and a defendant. A typical commercial bankruptcy case also has a judge, but that’s about where the similarities stop. A typical commercial litigation case, you see, is a two-party dispute. A typical commercial bankruptcy case is anything but. Who are the parties? The company that files the bankruptcy is the debtor (once a chapter 11 petition is filed, the debtor is called the debtor-in-possession). And, a debtor can have any number of creditors, each […]

A written tour of business bankruptcy and its alternatives You manage a private equity or hedge fund. Or maybe you work for a family office. Or maybe you’re the CEO or CFO of a business that has a competitor that is failing and you are considering trying to buy it on the cheap. Or perhaps you are the general counsel of a company that does business with a company that just filed for bankruptcy or that is being sued for a preference. Or maybe you are a business owner considering […]