Chapter 11 Strategies to Help Medium-Sized Businesses Survive

A medium-sized business can encounter financial problems even when it is not truly insolvent. Despite having loyal customers, valuable assets and strong long-term prospects, a company may struggle because of rising operating costs, expensive leases and contracts and aggressive collection efforts by certain creditors. When these financial problems start to interfere with a company’s growth or inhibit daily operation, Chapter 11 can stop them from becoming irreversible.

For medium-sized businesses facing mounting financial pressure, Chapter 11 offers more than temporary relief from creditors. It allows companies to address their financial challenges in an organized, focused way, providing a comprehensive framework for restructuring debt and improving cash flow. 

A business can preserve its value and remain operational by taking advantage of protections and procedures that are unavailable outside of a bankruptcy proceeding. In Chapter 11, a debtor can:

• Use the automatic stay to stop most lawsuits, foreclosures, repossessions and other collection efforts while the business develops a plan to restructure.
• Stabilize cash flow by restructuring payment obligations so that operating revenue can be directed toward payroll, inventory and other essential business expenses.
• Renegotiate contracts and leases that have become financially burdensome because of changing market conditions or reduced business needs.
• Restructure secured debt by seeking modified repayment terms, adjusted interest rates or other changes that make long-term obligations more manageable.

Most importantly, a debtor can demonstrate that the business can operate successfully and meet its obligations after restructuring.

Every Chapter 11 case requires proposing a feasible reorganization plan that shows the business can meet its future financial obligations. Chapter 11 sometimes permits the trustee to confirm a plan over the objections of some creditors if certain Bankruptcy Code requirements are met. That can stop creditors from trying to block restructuring when the plan is otherwise fair and reasonable.

Careful financial analysis, credible projections and a well-structured repayment strategy are essential in formulating a reorganization plan. An experienced Chapter 11 attorney can help business owners prepare a plan that will be workable and that will withstand court scrutiny.

At the Law Offices of Michael Jay Berger in Beverly Hills, we help medium-sized businesses take the steps needed to protect their interests during Chapter 11 bankruptcy proceedings. Obtain a free consultation by calling 310-271-6223 or contact us online.