90 Second Lessons
90 Second Lesson: Why Would a Debtor Choose to Liquidate Under Chapter 11?
Question: A reader asks, “I read about a company that filed Chapter 11 recently with a plan to sell all assets and go out of business. Why wouldn’t it file Chapter 7?” Answer: While it is true that the title of Chapter 7 is “Liquidation” and the title of Chapter 11 is “Reorganization,” these names […]
90 Second Lesson: What is a Chapter 15 Proceeding of the Bankruptcy Code?
QUESTION: Harry A asks, what is a Chapter 15 Proceeding? ANSWER: Chapter 15 of the Bankruptcy Code was enacted as part of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA). It replaced existing section 304 of the Bankruptcy Code. Section 304 empowered U.S. courts to open an “ancillary” proceeding to representatives of […]
90 Second Lesson: What will your lender do if you default on a commercial loan?
QUESTION: Scott T, emailed, asking, “I have a client who owns a few income-producing properties and she thinks she may not be able to make her next mortgage payments to her lender. What should I tell her to expect?” ANSWER: Once a loan default occurs or is looming, a proactive mortgage lender should be expected […]
90 Second Lesson: What is an “Exchange Offer?”
QUESTION: Fred T. emailed, asking, “I own securities of a company and heard on the news that it is contemplating doing an “exchange offer.” What is an exchange offer? ANSWER: An exchange offer is one way a company can complete an out-of-court restructuring. And, for a distressed company that has public debt it may […]
90 Second Lesson: What Is a “Composition Agreement?”
QUESTION: Jack B. wrote in the other day, asking us to explain what a composition agreement is. ANSWER: A composition agreement is a contract between a debtor and multiple creditors providing for the reduction or delay in payment of amounts owed by the debtor to the creditors entering into the composition. Entering into a […]
90 Second Lesson: If I File a Chapter 7 Bankruptcy, Are the Assets of My Single-Member LLC Safe From the Trustee?
QUESTION: A small business owner emailed us, on behalf of a friend, to ask whether assets in a single-member LLC could be used by a Chapter 7 Trustee in the LLC member’s personal bankruptcy case to satisfy creditors’ claims against the member. ANSWER: We can imagine this question arising where the member’s business is owned […]
90 Second Lesson: Can my borrower file for bankruptcy just to keep me from foreclosing?
QUESTION: An exasperated loan officer emailed us, asking whether the borrower – a commercial real estate lessor – could really file a chapter 11 case just to evade a state court order to appoint a receiver in a foreclosure proceeding against the borrower’s building. ANSWER: If a debtor were to admit that it filed […]
90 Second Lesson: Secured Creditors and Toll Charges
QUESTION: An investment banker recently wrote in, saying this: “I am currently helping a troubled company sell itself. The proposed buyer wants to buy its assets through a 363 sale in Chapter 11 and is offering to pay the full amount the bank is owed on its secured debt. The bank is pushing back, trying […]
90 Second Lesson: I’ve been asked to sign an involuntary bankruptcy petition. Should I?
QUESTION: The credit manager of an Akron-based company wrote, asking this: “One of our commercial accounts is pretty far behind in paying on our invoices. Another vendor approached me and asked me to join in signing an involuntary bankruptcy petition. Is there any legal risk in doing this? ANSWER: In a word, yes. If an […]
90 Second Lesson: To Stalk or Not to Stalk? Why be a Stalking Horse Bidder?
QUESTION: Jamie S. emailed recently, asking “Can you please sum up the pros and cons of serving as the “stalking horse” in a bankruptcy sale? ANSWER: Yes, Jamie, we can. A stalking horse bidder plays an important role in many bankruptcy acquisitions, and one of the most important decisions confronting a purchaser in a bankruptcy acquisition […]