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Don't Rush Into Chapter 11 Bankruptcy

If your company has serious litigation, or lender or creditor problems, refrain from hastily filing Chapter 11 bankruptcy. The reality is that most small companies don't survive Chapter 11. More companies would survive a non-bankruptcy workout. A business in financial trouble shouldn't rush into Chapter 11 reorganization for three important reasons:

  1. An out-of-court workout is less costly than Chapter 11 reorganization. You'll pay huge professional fees to navigate your small business through Chapter 11. An out-of-court creditor arrangement can cut your fees by 80%.
  2. An out-of-court workout keeps your financial information private. This is particularly important if you'll lose vital clients because of your financial instability. Employees also want secure employers. Out-of-court workouts give you confidentiality because it involves only you and your creditors.
  3. You'll avoid Chapter 11's rules and restraints: A non-bankruptcy workout gives you more flexibility to design your repayment plan and also how you operate your business during the workout.

However, out-of-court workouts aren't always your best alternative. A dissenting creditor can reject your settlement and sue your business, or petition you into bankruptcy. Holdout creditors often upset workout plans.

One alternative is the pre-packaged Chapter 11. Creditors accept your proposed non-bankruptcy repayment plan and agree that if you are forced to file Chapter 11, they agree to the same reorganizational plan under Chapter 11. A majority of your creditors can then accept an out-of-court plan.

In Chapter 11, they'll force your settlement upon the dissident creditors. Your company can successfully and quickly emerge from Chapter 11 and save you time, aggravation and the huge legal fees of a prolonged Chapter 11.

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Categories: Bankruptcy
The Presser Law Firm, P.A. - Asset Protection Attorney
Located at 6199 N. Federal Highway Boca Raton, FL 33487. View Map
Phone: (561) 953-1050
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