The borrower is an LLC managed by a greedy principal member. The borrower slowly pays the secured creditor and unsecured creditors over years and its business becomes insolvent. The insolvent LLC makes cash distributions to its members, but not to the secured creditors. Is there a law against this sort of behavior?
A creditor may seek appointment of a chapter 11 trustee in replacement of the debtor in possession, but there are special considerations to make first.
Editor’s Note: this is part of our irregular series in which we answer readers’ questions. If you have a question, submit it to [email protected] and we will try to answer it. Question Robin T. wrote in asking, I own a small retail chain that has been struggling. I hired a lawyer to negotiate with my creditors, and […]
A Solvent Debtor Can File for Bankruptcy…but Can They Survive a Motion for Dismissal? Suppose that your borrower or customer files for chapter 11 bankruptcy. You do not like this, because you’ll almost certainly not collect the full amount owed to you. In fact, to get anything at all, you’ll have to get involved with […]
What Is the Purpose of Chapter 15 Bankruptcy? Bankruptcies are global fixtures, ones not necessarily restricted by borders. A company that files for insolvency protection in the Caribbean, Europe or the Far East may also have assets and interests elsewhere, like New York or Miami. Under those circumstances, the debtor’s representative may need the assistance […]
Considerations for Companies in a Cash Crisis A liquidity crisis is a severe financial situation in which a company does not have enough cash or cash-convertible assets, which can lead to defaults and bankruptcy. Managing cash is critical when working to preserve or maintain solvency in order to maximize opportunities for a successful turnaround or […]
2020 Saw Increased Healthcare Provider Bankruptcies. What Should Companies & Restructuring Professionals Know Moving Forward? Healthcare providers face many pressures, including costs associated with regulatory compliance and necessary technological and infrastructure investments. Congress’ repeated attempts to reform healthcare legislation have long created uncertainties for the healthcare industry. A PwC report predicts that throughout 2021, healthcare […]
Adequate Assurance, Suspended Delivery, and Other Rights and Remedies of a Supplier to a Bankrupt Retailer The impending bankruptcy of a retailer is one of the most stressful experiences that a supplier may face. The supplier is confronted not only with the potential loss of a major customer, but also with the possibility of significant […]
What Distressed Asset Investors Can Glean from Low Interest Rates, Rising Asset Prices and Insolvency on the Horizon DailyDAC readers know that we try to confine ourselves to publishing “evergreen” thought leadership—general education for business owners and investors about business bankruptcy, its alternatives, and related subjects. There isn’t a stark line between the news of […]
Businesses Have Options for Defending a Preference Action. Here’s How to Build the Right Defense. Your company has just been served with a preference complaint. The complaint seeks to recover tens or hundreds of thousands of dollars even though your company has already taken a loss on the debtor’s accounts. Your initial response is anger […]