Los Angeles Attorney Experienced in Business Debt Restructuring
Lawyer skilled at implementing best alternatives to avert insolvency
Many businesses, whether they are startups or well-established corporations, may need to incur debt in order to finance their operations, capital improvements or other needs, usually either by taking out bank loans or hard money loans. When servicing those debts becomes too large a share of the business’ budget and repaying them becomes difficult, the business becomes stressed or even insolvent and will want to reduce its liabilities or make them easier to repay, but may not want to file for bankruptcy. A simpler alternative is debt restructuring. At the Law Offices of Michael Jay Berger, I advise business clients on using this form of relief to best advantage.
How debt restructuring works
Debt restructuring is a process in which the business negotiates with its creditors to alleviate the financial burden of its debts without defaulting, in a way that is mutually satisfactory to both parties. There are several potential methods:
- Reducing the interest rate on loans
- Increasing the amount of time over which a debt must be paid off
- Reducing the amount of debt that needs to be paid
- Suspending the payments for a while
- Consolidating two or more loans from the same creditor into one payment
I advise a business to develop a debt restructuring plan, which realistically takes account of budget forecasts and cash flow projections and sets debt-settlement goals that can be accomplished within those fiscal constraints. The next step is to implement the debt restructuring plan by negotiating a workout plan with creditors, in which the creditors agree to one or more debt restructuring options. Creditors generally agree to a realistic workout plan because they know they will receive less money if the business is forced to file for bankruptcy.
Why choose debt restructuring over bankruptcy?
A company can restructure its debt through business bankruptcy, but a non-bankruptcy debt restructuring plan has significant advantages:
- Cost and time savings — First, it is likely to be substantially less costly, time-consuming and difficult. A bankruptcy has a $1,717 filing fee and requires retaining a lawyer to represent the debtor business until the bankruptcy is completed, which typically takes six to 18 months. In contrast, voluntary debt restructuring involves no filing fees, requires the use of an attorney merely to negotiate and draft the necessary contracts and documents, and may be completed in a few months.
- Flexibility — Debt restructuring is voluntary and flexible, whereas bankruptcy imposes strict legal requirements that include supervision of a bankruptcy trustee and court approval with respect to the company’s financial affairs and to the eventual discharge.
- Severability of debt — While a bankruptcy proceeding must address all of the business’ debts and held by all debtors, a restructuring can be selective, dealing with the most massive or pressing debt and with creditors most in peril should the business default.
Finally, a voluntary debt restructuring does not carry the stigma of bankruptcy.
Contact a debt restructuring attorney in Southern California
I am a Certified Specialist in Bankruptcy, a recognition of my experience and expertise in the field, and I have well-practiced acumen for helping businesses avoid bankruptcy and still reduce their debts. If your business needs debt relief, call the Law Offices of Michael Jay Berger at 310-271-6223 or contact us online to schedule a consultation at my Los Angeles office.