Tag Archives: creditors
How Cramdowns Can Help With a Chapter 11 Reorganization
A cramdown is a powerful tool available under the U.S. Bankruptcy Code, allowing a court to approve a business’s Chapter 11 reorganization plan even if certain creditors object. In essence, a cramdown prevents a single group of creditors from holding up a plan that would keep the business running, preserve jobs and potentially pay creditors […]
Understanding the “Subsequent New Value” Defense in Bankruptcy
When a business files for bankruptcy, payments made to creditors during the 90 days prior to filing come under scrutiny. Bankruptcy trustees or debtors in possession may seek to “claw back” these payments — known as “preferences” — to ensure fair treatment of all creditors. However, the Bankruptcy Code protects vendors who continue working with […]
What Businesses Need to Know About Involuntary Bankruptcy
Involuntary bankruptcy occurs when creditors file a petition in court to force a debtor into proceedings. Such cases can arise in the context of disputes with creditors, acute liquidity crises or suspicions that company insiders are moving or hiding assets to evade legitimate debts. Businesses should take the risk of an involuntary bankruptcy seriously, as […]
Negotiating With Creditors During a Chapter 11 Restructuring
One of the most critical aspects of a Chapter 11 can be negotiating with creditors on key aspects of the restructuring plan. The goal is to forge agreements that allow the business to stabilize and recover while ensuring creditors recover as much as possible relative to the alternative: liquidation. Businesses that approach creditor negotiations with […]
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 […]
Weighing Assignment for the Benefit of Creditors as a Debt Remedy
Companies facing severe financial distress have more than one relief option to consider. An assignment for the benefit of creditors (ABC) is a less commonly known alternative to bankruptcy proceedings like Chapter 11. An ABC involves a transfer of the debtor company’s assets to an assignee, who assumes responsibility for liquidating the assets and distributing […]
Limits on Chapter 11 Debtors’ Use of Cash Collateral
In a Chapter 11 bankruptcy, the debtor is generally allowed to remain in control of their business as a debtor-in-possession. However, this control is subject to restrictions. One of these is prohibition of use of cash collateral, which refers to cash, securities, accounts receivable, inventory and other liquid assets that may be pledged as security […]
How a Liquidation Bid Can Derail a Prepackaged Chapter 11
When a company files a prepackaged Chapter 11 bankruptcy, it has already negotiated a deal with creditors and potential buyers for the business to be sold as a going concern. This approach can streamline the process, minimize disruptions and maximize value for stakeholders. However, complications can arise if a liquidation bid emerges as a competing […]
Fending Off Creditors’ Challenges in Bankruptcy Adversary Proceedings
An adversary proceeding in bankruptcy is essentially a lawsuit within the context of a bankruptcy case. It is initiated by a creditor or another party who seeks to challenge certain aspects of the bankruptcy or to resolve disputes that arise within the bankruptcy process. These proceedings can significantly affect the debtor’s ability to obtain a […]
Defending Against Adversary Proceedings Brought by Creditors
Bankruptcy offers a fresh start for debtors struggling with overwhelming debt. However, this process isn’t always smooth sailing. Creditors may object to various aspects of the bankruptcy case by bringing an adversary proceeding — essentially, a case within the case. Such proceedings can arise when creditors challenge discharge of debts, allege fraudulent transfers or attempt […]
