The death of Chapter 11

Chapter 11 Bankruptcy has been pronounced dead by many. This is due, in large part, to the fact that Chapter 11 evolved over the last 35 years into a system for structured sale and re-finance and lost most of its original characteristics as a reorganization procedure. The expenses of a Chapter 11 Bankruptcy skyrocketed, the need to maximize enterprise value, and the speed at which cases had to be resolved kept pace with that upward trend as the velocity at which a case was resolved took precedence over keeping the business intact for its owners to rebuild. Even the Bankruptcy Attorney for the Debtor found themselves caught in an ethical conundrum between assisting the real live people who brought the business in for bankruptcy and the ever present mandate to monetize assets as quickly as possible. This was all caused by the structure of the 1978 Code, and all driven by the superfluity of money in the hands of people hungry to speculate in distressed companies. Gone are those days!

While medium to large size public companies may still have access to capital markets, investment bankers, who will fund their fast paced enter and exit Chapter 11 cases, for the small business owner Chapter 11 is once again a way to restructure debt. Under Chapter 11 a company can make fundamental changes, shed unprofitable obligations, and, cut a deal with creditors that restructures debt and keeps the business owner at the helm letting the business go forward with renewed vitality and with the benefit of some hard earned experience. And, while there are many large law firms with corporate insolvency practice groups who are expert at handling the mega-cases, there are a smaller number of experienced bankruptcy attorneys, many Board Certified, who know the problems of small business and can handle a Chapter 11 Reorganization case with efficiency and effective results.

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