Advising your client about Chapter Eleven
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In today’s business environment, thinking the unthinkable-filing for Chapter 11 on your client’s behalf-may be the key to your client’s survival. The process is fraught with risk and heartache…and it may well be the most rewarding service you ever provide. Once upon a time, not so very long ago, “bankruptcy” was a dirty word, and “Chapter 11″ was a term little known outside of the bankruptcy courts hidden in post office buildings across America. * Times have change. * Many of the airlines and department stores in the country have filed for bankruptcy protection. Companies as diverse as Johns-Manville and A.H. Robins have used the process to deal with mass tort litigation, and the words “Chapter 11″ are on every businessperson’s lips. * Accordingly, it’s a question of when–not whether–one of your clients will call and utters the fateful words, “I think we’re going to have to file Chapter 11.” To do business in the ’90s, you need to have some idea of what a Chapter 11 case means to your client, and what a Chapter 11 case will mean to you. Your client probably has picked up all the cocktail party chatter about the process: how this developer held off his bank for two years, or how that investor bought a building or a company on the cheap, free and clear of the old creditors’ claims. Your client may think Chapter 11 is a cure for all corporate ills, without having any notion of the costs, risks or time and heartache involved in cutting a new deal with creditors. WHAT CHAPTER 11 MEANS TO YOUR CLIENT Technically speaking, Chapter 11 is a method for a business to restructure its existing debt and, if necessary, its existing ownership interests. The automatic stay of Bankruptcy Code section 362(a) stops all lawsuits and foreclosure actions against the Chapter 11 debtor, at least until a bankruptcy judge grants relief from the stay. In the meantime, the debtor negotiates a reorganization plan with creditors. If a majority of creditors vote to accept the reorganization plan, which can pay Source : accessmylibrary.com |