Careful Attorneys Handle California Business Valuation During Bankruptcy

Ensuring proper calculation of values in Chapter 11 cases

When a business undergoes debt reorganization in a Chapter 11 bankruptcy, a critical step in the process is a valuation of the business’s assets. This valuation can be difficult even in normal times and even more so in periods of forced closings and financial upheaval, such as the recession caused by the COVID-19 pandemic. At the Law Offices of Michael Jay Berger in Los Angeles, California, I understand the valuation process and how to carry it out efficiently and productively. If you are a debtor in a Chapter 11 bankruptcy, I am ready to put my knowledge and experience to work for you.

Why is a business valuation important in a Chapter 11 bankruptcy?

When a business files for Chapter 11, it must propose a debt reorganization plan. One element of this plan is a liquidation analysis, which shows what creditors would receive if the case were converted to a Chapter 7 bankruptcy. To demonstrate this, the debtor must calculate the value of its property, including any collateral pledged for its outstanding debts. The liquidation analysis helps the creditors decide whether to accept the reorganization plan.

A more comprehensive business valuation can also be prepared, serving such purposes as:

• Seeking a debtor-in-possession (DIP) loan, which may be essential to keeping the business afloat during debt reorganization
• Selling off unprofitable parts of the business
• Lowering the amount of debt that the business must pay the creditors
• Demonstrating the feasibility of the Chapter 11 reorganization plan if it is challenged during the confirmation hearing

If I represent your business in a Chapter 11 bankruptcy, I will take the course of action best designed to achieve a full and accurate business valuation that is suitable to your situation.

How business valuations work

A liquidation valuation measures the value of the business when it closes down. It determines the worth of the business’ physical assets, such as real estate, equipment and merchandise, and reduces them by the company’s liabilities. Intangible assets, such as good will, trademarks and other intellectual property, are not included. Liquidation value is thus generally lower than the fair market value of the business.

However, a more comprehensive valuation may prove useful. During the course of a Chapter 11 bankruptcy, the debtor usually continues to operate the business, and a thorough business valuation will take account of the value of business as a going concern. Not only physical assets but also intangible assets and the business’s cash flow can be taken into consideration, and some or all assets can be valued at their fair market value. This valuation also recognizes that some business assets serve as collateral for secured loans and that, because debtors are required to provide adequate protection to creditors, the business must also maintain enough property to pay its debts.

Some small to medium-size debtor companies might be able to do a business valuation themselves but medium or larger companies need to hire valuation experts to do the work. As your attorney, I can explain these issues in detail and ensure that your business valuation is conducted in a manner most beneficial to your situation. I can help you do the valuation or retain the necessary professional assistance.

Contact experienced Chapter 11 bankruptcy lawyers for business valuations

I am a certified bankruptcy specialist with four decades of experience representing creditors and debtors in all types of bankruptcy proceedings. If you are contemplating or pursuing a Chapter 11 for your business, you can trust the Law Offices of Michael Jay Berger in Los Angeles, California to provide capable legal counsel in conducting a business valuation and attending to all other aspects of the case. Call us at 310-271-6223 or contact us online to schedule a consultation.