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 principal at Much Shelist. 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 Magazine; Smart Business Magazine; The M&A…
Commercial Receivers Association Appoints Two New Board Members– Emily Cantwell and John Cruciani
Dealing with Corporate Distress 17: Focus on Assuming & Rejecting Executory Contracts & Unexpired Leases in Bankruptcy
When a Seller of Real Property Files for Bankruptcy Before Closing
Strategic Filing: Chapter 11 Bankruptcy for Litigation Advantage?
Dealing with Corporate Distress 14: The Secured Creditor’s Perspective About its Debtors
Dealing with Corporate Distress 11: How to Protect Your Claim In & Out of Bankruptcy