Will Chapter 11 Save My Business?: The Answer to these 6 Questions will Let You Know - Legal Guides - Avvo
Will Chapter 11 Save My Business?: The Answer to these 6 Questions will Let You Know
Written by attorney Julianne R. Frank | Dec 13, 2017
Chapter 11 bankruptcy for businesses Liquidating business assets Bankruptcy Bankruptcy petition Bankruptcy court Bankruptcy documents Chapter 11 bankruptcy Debt Bankruptcy liquidation Bankruptcy and debt Business
Chapter 11 is a powerful medium. There are several criteria that we in the restructuring business utilize to determine if our client’s business can be successfully reorganized or restructured using the Chapter 11 process. Below are some of the most common tools we use to diagnose whether a business is a good candidate, and to determine whether we can get you back on solid footing:
The causes of the distress often govern whether a business can be saved. The most frequent causes are bad management, economic downturn, unanticipated competition, excessive debt, infighting, or poor marketing. If management is incompetent or the principals are at war, Chapter 11 will often be an inadequate solution, because no amount of number crunching or court edicts are going to turn around a business when its problem is the people involved.
Chapter 11 works best when the problem is a numbers game...where bandages over the bleeding can be applied to give the business time to heal. To determine that, we employ the art of the spreadsheet. We create projections that take the current fixed operating expenses of the business, and the average monthly income based on historical perspective, adjusting them for any projected change going forward. We remove from the analysis all secured debt payments, and all accounts payable other than cost of goods going forward. We analyze the collateral value to loan balance ratios to determine if we can strip loans. If so, we project the restructured and reamortized loan payments, and plug those back in. Finally, we make sure there is then some net income left that can applied to provide some unsecured dividend. All of that gives us an analytical framework to determine if the tools of Chapter 11 can right the ship.
Are the prime players "all in"?
Our clients come to us already having a difficult time running their business. Now we add a whole new full time job to their daily grind. That is effectively what Chapter 11 requires. The investment of time and energy that management must devote to the process is substantial. The lawyer is the guide or conductor--the real work is in the trenches and must be done by the insiders. If we do not perceive that our clients are willing to contribute some serious overtime to the effort, it will diminish the chances that our legal team can be effective to them. If we have to play "dentist"...constantly pulling teeth to get what we need from the client...this will assuredly handicap the client's chances for success. We advise our clients to be prepared for a highly interactive exercise...and that if their heart and head are not into saving their business, no amount of superb lawyering will be enough to pull them through.
Very often, business distress encompasses several related entities. For example, the owners may have an interest in the real estate that houses the entity that operates their business. Cash flow issues may be causing upstream payments toward the real estate loans to fall behind. These issues can add complication to the Chapter 11 process, because filing for just the business may not protect the business from losing its location...thus mandating the filing of multiple Chapter 11's. This adds expense, and of course creates procedural and sometimes ethical issues to the equation. Multiple filings and case consolidation require a careful analysis of each entity as if it were filing on its own, and the seeking of a global non-conflicting resolution
Too often Chapter 11 cases fail, and a primary cause of failure is inadequate preparation; a failure to do the homework and to roadmap an exit strategy up front.. Pre-filing analysis is, in our opinion, the secret to successful outcomes in Chapter 11. Benchmarks and waypoints along the way should be plotted, and the expectations monitored to compare with projections as the case unfolds. The lawyer who is first pondering the reorganization plan as the case unwinds will rarely be steering their client into a safe harbor.
How do your clients find the right lawyer?
Experience, credentials, and track record are keys. You should ask how many cases the lawyer has filed and what percentage of cases have been successfully confirmed. Ask to talk to other clients who have gone through the process. And find a board certified lawyer.
You can find a list of a nationally certified Business bankruptcy lawyers at www.abiworld.org.
Bankruptcy Attorney in Jupiter, FL
Call Reveal number tel:5613200934
Do I have to amend my current Chapter 13 to a Chapter 11 to save property that is deeded to a business that I'm affiliated with?
I own an LLC and have $15K on Amex credit card w/ a personal guarantee. Can I not pay or file chapter 11 with no credit impact?
A business owes me money I loaned them. They have now filed chapter 11 bankruptcy. What kind of lawyer do I need to help me?
Will Chapter 11 Save My Business?: The Answer to these 6 Questions will Let You Know - Legal Guides - Avvo
Will Chapter 11 Save My Business?: The Answer to these 6 Questions will Let You Know
Written by attorney Julianne R. Frank | Dec 13, 2017
Chapter 11 bankruptcy for businesses Liquidating business assets Bankruptcy Bankruptcy petition Bankruptcy court Bankruptcy documents Chapter 11 bankruptcy Debt Bankruptcy liquidation Bankruptcy and debt Business
Chapter 11 is a powerful medium. There are several criteria that we in the restructuring business utilize to determine if our client’s business can be successfully reorganized or restructured using the Chapter 11 process. Below are some of the most common tools we use to diagnose whether a business is a good candidate, and to determine whether we can get you back on solid footing:
The causes of the distress often govern whether a business can be saved. The most frequent causes are bad management, economic downturn, unanticipated competition, excessive debt, infighting, or poor marketing. If management is incompetent or the principals are at war, Chapter 11 will often be an inadequate solution, because no amount of number crunching or court edicts are going to turn around a business when its problem is the people involved.
Chapter 11 works best when the problem is a numbers game...where bandages over the bleeding can be applied to give the business time to heal. To determine that, we employ the art of the spreadsheet. We create projections that take the current fixed operating expenses of the business, and the average monthly income based on historical perspective, adjusting them for any projected change going forward. We remove from the analysis all secured debt payments, and all accounts payable other than cost of goods going forward. We analyze the collateral value to loan balance ratios to determine if we can strip loans. If so, we project the restructured and reamortized loan payments, and plug those back in. Finally, we make sure there is then some net income left that can applied to provide some unsecured dividend. All of that gives us an analytical framework to determine if the tools of Chapter 11 can right the ship.
Are the prime players "all in"?
Our clients come to us already having a difficult time running their business. Now we add a whole new full time job to their daily grind. That is effectively what Chapter 11 requires. The investment of time and energy that management must devote to the process is substantial. The lawyer is the guide or conductor--the real work is in the trenches and must be done by the insiders. If we do not perceive th
at our clients are willing to contribute some serious overtime to the effort, it will diminish the chances that our legal team can be effective to them. If we have to play "dentist"...constantly pulling teeth to get what we need from the client...this will assuredly handicap the client's chances for success. We advise our clients to be prepared for a highly interactive exercise...and that if their heart and head are not into saving their business, no amount of superb lawyering will be enough to pull them through.
Very often, business distress encompasses several related entities. For example, the owners may have an interest in the real estate that houses the entity that operates their business. Cash flow issues may be causing upstream payments toward the real estate loans to fall behind. These issues can add complication to the Chapter 11 process, because filing for just the business may not protect the business from losing its location...thus mandating the filing of multiple Chapter 11's. This adds expense, and of course creates procedural and sometimes ethical issues to the equation. Multiple filings and case consolidation require a careful analysis of each entity as if it were filing on its own, and the seeking of a global non-conflicting resolution
Too often Chapter 11 cases fail, and a primary cause of failure is inadequate preparation; a failure to do the homework and to roadmap an exit strategy up front.. Pre-filing analysis is, in our opinion, the secret to successful outcomes in Chapter 11. Benchmarks and waypoints along the way should be plotted, and the expectations monitored to compare with projections as the case unfolds. The lawyer who is first pondering the reorganization plan as the case unwinds will rarely be steering their client into a safe harbor.
How do your clients find the right lawyer?
Experience, credentials, and track record are keys. You should ask how many cases the lawyer has filed and what percentage of cases have been successfully confirmed. Ask to talk to other clients who have gone through the process. And find a board certified lawyer.
You can find a list of a nationally certified Business bankruptcy lawyers at www.abiworld.org.
Bankruptcy Attorney in Jupiter, FL
Call Reveal number tel:5613200934
Do I have to amend my current Chapter 13 to a Chapter 11 to save property that is deeded to a business that I'm affiliated with?
I own an LLC and have $15K on Amex credit card w/ a personal guarantee. Can I not pay or file chapter 11 with no credit impact?
A business owes me money I loaned them. They have now filed chapter 11 bankruptcy. What kind of lawyer do I need to help me?