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High Court Ruling Curtails Use of Third-Party Releases in Chapter 11
The U.S. Supreme Court’s decision in what is known as the Sackler Discharge case has fundamentally altered how companies and their equity owners use Chapter 11 bankruptcy to resolve large-scale liability. The court definitively rejected the use of non-consensual third-party releases for equity holders or affiliates who are not themselves seeking a discharge through bankruptcy. […]
Rite Aid’s Demise Shows the Pitfalls of Exit Financing in Chapter 11
Exit financing is a new loan or credit facility that a company secures as it prepares to emerge from Chapter 11 bankruptcy. It can be a useful component of a successful reorganization plan, helping to provide a foundation for the company’s post-bankruptcy future. However, as demonstrated by national pharmacy chain Rite Aid’s recently announced second […]
How Becoming a Debtor in Possession Changes a Business Owner’s Role
Chapter 11 bankruptcy is a remedy designed to help a distressed business gain debt relief, reorganize and return to solvency. A defining feature of Chapter 11 is that the existing equity owner often remains in control of the company as a “debtor in possession” (DIP). However, an important transformation occurs. The business owner’s role shifts […]
What Are the Chief Causes of Business Bankruptcies?
A significant risk for companies of all sizes and industries is that economic circumstances, some outside their control, will force them into insolvency. Such risks become more apparent as market forces and regulatory actions both home and abroad can affect a company’s prospects. Understanding the most common reasons for business bankruptcy can provide valuable insight […]
With Car Repossessions on the Rise, Chapter 13 Protection Can Be Vital
The U.S. is witnessing a drastic surge in vehicle repossessions, with rates reaching levels unseen since the aftermath of the 2008 financial crisis. Repossessions in 2024 were up 23 percent compared to the prior year, which is also 14 percent higher than the 2019 pre-pandemic levels. As purchase prices and borrowing costs have risen substantially, […]
The Perils of Selling Customer Personal Data During Chapter 11
A distressed company enters into Chapter 11 bankruptcy seeking to reorganize its debts, streamline operations and satisfy creditors so as to emerge solvent. Sale of assets is one method of raising capital to succeed in this venture. Among the assets that may be evaluated for sale are digital resources, including databases containing customers’ personal information […]
Employment Considerations in Filing a Chapter 11
When a company files for bankruptcy under Chapter 11, its employees often face a turbulent and uncertain environment. The process of reorganization introduces a host of employment-related issues, and the choices made by the company’s leadership can have a significant impact on staff morale, productivity, and retention. The news of a bankruptcy filing is unsettling […]
How Equity Holders Can Protect Their Interests During Chapter 11
When a company files for Chapter 11 bankruptcy, its existing equity holders (such as shareholders) are typically at the bottom of the repayment hierarchy. In U.S. bankruptcy law, the order of claims is strictly observed: secured creditors are paid first, followed by unsecured creditors, and then, only if anything remains, equity holders receive payment. This […]
Using Exemptions in an Individual Chapter 11 Bankruptcy
Bankruptcy exemptions are legal protections that allow debtors to keep certain property out of the reach of creditors when seeking bankruptcy relief. While exemptions are most frequently associated with Chapter 7 (liquidation) and Chapter 13 (wage earner’s reorganization) cases, they are also relevant in Chapter 11 bankruptcies when the debtor is an individual, rather than […]
What Goes Into Planning a Chapter 11 Exit Strategy?
Exiting Chapter 11 bankruptcy can be a turning point for a distressed business, offering the opportunity to reset operations, restructure debt, and regain financial stability. To maximize the chances of success, a business must develop a carefully tailored exit strategy that aligns with its unique financial situation, business model, and relationships with creditors. Chapter 11 […]
