Home>Does management have the resources & desire to engage in the reorganization process?
Does management have the resources & desire to engage in the reorganization process?
June 29, 2022
By Diane Drain Attorney & Retired Law Professor
Bankruptcy reorganization in Chapter 11 requires significant time on the part of the owners and managers to comply with the requirements of the bankruptcy system. This option is far from inexpensive.
The business must have a very viable future in order to seek this remedy. Most reorganizations fail, usually for lack of the ability to stick to a budget, or to control the events and costs that forced the company into a bankruptcy. Many times the Debtor’s owner has no real idea how much time and effort goes into a successful chapter 11.
The value of the bankruptcy for the company and its owners/shareholders is that, in exchange for the protection of the automatic stay and other bankruptcy protections, the debtor provides full disclosure of its financial condition to creditors and the court, both at the beginning of the case and on a monthly basis in a form of a income and expense statement, and operates as a fiduciary for its creditors while the bankruptcy is ongoing. Meaning that the owner of the company must make decisions for the benefit of the creditors, not for his own benefit.
By Diane Drain|Published On: June 29th, 2022|Last Updated: July 28th, 2022|
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