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 as having four stages:
They (whoever “they” are) say that a picture is worth a thousand words; the chart below (created before the word “infographic” came into its recent prominence) should help reinforce what we say above about the lifecycle of a distressed company: Copyright 2006 Jonathan Friedland and James H.M. Sprayregen
To read other installments in this series, click here.
For a great discussion on insolvency, we recommend When a Customer Becomes Insolvent Webinar and Buying Distressed Assets and Securities Webinar. You can also learn about federal equity receiverships here, and get advice on what to do when your business is struggling here.
Prior to joining the faculty in 2000, Professor Kuney was a partner in the San Diego office of Allen Matkins Leck Gamble & Mallory LLP where he concentrated his practice on insolvency and reorganization matters nationwide. Before that he received his legal training with the Howard, Rice and Morrison & Foerster firms in his hometown…
Jonathan Friedland is a senior partner in Sugar Felsenthal Grais & Helsinger LLP’s Chicago office. He is ranked AV® Preeminent™ by Martindale.com, has been repeatedly recognized as a “SuperLawyer”, by Leading Lawyers Magazine, is rated 10/10 by AVVO, and has received numerous other accolades. He has been profiled, interviewed, and/or quoted in publications such as Buyouts…
The Good, the Bad, and the Ugly of Replacing a Debtor’s Management with a Chapter 11 Trustee
Dealing with Corporate Distress 03: Welcome to the Jungle: The Animals of the Corporate Restructuring Industry
Fraud And Deceit in Bankruptcy Cases – Lessons from “The Clouds”
Dealing with Corporate Distress 02: These Are the People in Our Neighborhood: An Overview of Parties in Chapter 11
Dealing with Corporate Distress 01: Hello Darkness, Our Dear Friend
Selling Distressed Assets: The Assignment for the Benefit of Creditors Alternative
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