Tag Archives: chapter 11
Do’s and Don’ts for Seeking Debtor-in-Possession (DIP) Financing
Chapter 11 bankruptcy can be a lifeline for a business in financial distress. One vital aspect of successfully using this debt relief remedy is obtaining debtor-in-possession financing. DIP financing provides a company with the liquidity needed to cover operating expenses, including payroll, rent and other overhead. However, securing this type of financing requires careful planning […]
Benefits of Asset Sales During Chapter 11
In a Chapter 11 bankruptcy, a debtor company retains control of its operations while reorganizing its debts and assets. One of the key strategies a company can employ during this process is selling assets. An asset sale can provide a way to generate immediate cash flow, which can be used to pay down debts, fund […]
Benefits of Conducting a 363 Sale of Assets in a Chapter 11
A debtor-in-possession (DIP) in a Chapter 11 bankruptcy proceeding can seek court approval to sell some or all of the company’s assets at auction through a process known as a 363 sale. Named after Section 363 of the U.S. Bankruptcy Code, it facilitates the efficient liquidation of assets, often resulting in higher recovery values and […]
Getting the Most Out of the Automatic Stay in a Chapter 11 Bankruptcy
When a bankruptcy petition is filed, an automatic stay immediately goes into effect, giving debtors a reprieve from most collection activities. This is in effect a court order that halts lawsuits, garnishments, and all forms of creditor harassment, allowing the debtor breathing room to reorganize their financial affairs. In a Chapter 11 case, the stay […]
Is a Prepackaged Chapter 11 Right for Your Situation?
Prepackaged Chapter 11 bankruptcies, often referred to as “prepacks,” are a streamlined form of bankruptcy reorganization. Unlike traditional Chapter 11 proceedings, which can involve extensive negotiations and court hearings, prepackaged bankruptcies allows a company to negotiate the terms of a reorganization plan with creditors in advance. If the required majority of creditors approve the plan, […]
What Are the Basic Tests of Eligibility for Subchapter V Reorganization?
Subchapter V of the U.S. Bankruptcy Code represents a streamlined, more cost-effective option for small business debtors seeking protection from creditors while reorganizing debt. Introduced as part of the Small Business Reorganization Act of 2019, it simplified the reorganization process with the intent of reducing the complexities and expenses typically associated with Chapter 11 filings. […]
Understanding the Absolute Priority Rule and Its Exceptions
The absolute priority rule, as set forth in Section 1129(b)(2) of the U.S. Bankruptcy Code,., is integral to a Chapter 11 reorganization plan getting confirmed by the court. The plan must adhere strictly to a hierarchical system of claim priority, which dictates the sequence in which creditors are paid. The rule is meant ensure fairness […]
Deciding Whether Chapter 11 Is Right for Your Business
In the face of financial distress, businesses can find themselves weighing the options available to address their operational challenges. Among these options, Chapter 11 bankruptcy stands out as a potential avenue for businesses to restructure their debts and reorganize their operations. This form of relief offers advantages but also involves complexities that necessitate careful consideration. […]
How Leases and Executory Contracts Are Handled in Chapter 11
For a business in Chapter 11 bankruptcy, leases and executory contracts can represent valuable assets or burdensome obligations. An executory contract is one where both parties have unperformed obligations. Leases, where rent payments remain outstanding and the landlord has obligations to maintain the property, fall under this category. Here are some key points a Chapter […]
How Chapter 11 Restructures Business Debt
When a business finds itself drowning in debt, Chapter 11 bankruptcy can offer a lifeline. Unlike Chapter 7, which liquidates assets to repay creditors, Chapter 11 allows for debt reorganization. This means the business gets a chance to develop a plan to reorganize its debts and return to solvency. Here’s how Chapter 11 tackles these […]
