Surviving (and Thriving) After a Chapter 11 Bankruptcy

While bankruptcy is often viewed as having negative connotations, the reality is that there are several ways that companies of all sizes can (and do) leverage the Chapter 11 bankruptcy process to their advantage. Companies that timely reorganize their debts under Chapter 11 can come out stronger on the other side, and they can preserve their relationships with key creditors during the process. When used strategically, business bankruptcies will have far more upsides than downsides, and by working closely with an experienced Miami Chapter 11 bankruptcy lawyer, companies can ensure that they get as much out of the process as possible.

Short-Term Financial Benefits of a Chapter 11 Bankruptcy Filing

Pursuing a Chapter 11 bankruptcy can have both short-term and long-term benefits. The short-term benefits enable companies to navigate the process strategically, rather than rushing through it to avoid financial calamity. As a result, the short-term benefits of the process can ultimately have favorable long-term consequences as well.

Some of the key short-term financial benefits of a Chapter 11 bankruptcy filing include:

• Automatic Stay – Filing for bankruptcy under Chapter 11 triggers an automatic stay, which prevents the company’s creditors from pursuing collection during the bankruptcy process.
• Continued Business Operation – Typically, companies that file under Chapter 11 are able to continue their business operations during the bankruptcy process.
• Debtor in Possession (DIP) Financing – Most Chapter 11 debtors are eligible for debtor in possession (DIP) financing. This can provide a much-needed capital infusion that helps sustain the business and position it for success post-bankruptcy.
• Strategic Planning – With the automatic stay, company owners and executives have the time they need to make strategic decisions focused on what is best for the company in the long term.
• Debt-Specific Approach – During the Chapter 11 bankruptcy process, companies can take a debt-specific approach focused on protecting key creditor relationships while also structuring a manageable debt load.

Leveraging the Chapter 11 Process for Long-Term Financial Stability

In the long term, pursuing a Chapter 11 bankruptcy can serve as the first step on the path toward profitability. Companies that go through the Chapter 11 process are often not only financially stronger, but also more efficient and nimble.

Some of the key long-term financial benefits of a Chapter 11 bankruptcy filing include:

• Debt Restructuring – The primary purpose of a Chapter 11 filing is to restructure the company’s debts. This allows the company to meet its financial obligations in the ordinary course of business while still meeting payroll, paying its bills and investing in the future.
• Rebuilding Trust – By going through the Chapter 11 process in good faith (and avoiding default), companies can rebuild trust with their creditors—and they can leverage this trust to meet their future needs.
• Improving Efficiency – Oftentimes, going through the reorganization process will allow companies to identify and explore efficiencies that they did not previously have the time or resources to consider.
• Avoiding Collection-Related Litigation – Avoiding default also means avoiding collection-related litigation—which itself can prove costly and potentially threaten companies’ viability.
• Facilitating Long-Term Growth – Ultimately, restoring a company’s financial stability through the Chapter 11 process can facilitate long-term growth. A strategic reorganization plan will leave the company with the flexibility and cash flow it needs to focus on its long-term business goals.

5 Key Considerations for Successfully Navigating a Chapter 11 Business Bankruptcy

While going through the Chapter 11 bankruptcy process can offer several benefits to struggling companies, realizing these benefits requires an informed and forward-thinking approach. With this in mind, here are five key considerations for successfully navigating a Chapter 11 business bankruptcy:

1. Eligibility to File

One of the first key considerations is whether your company is eligible to file under Chapter 11. This requires a careful analysis of several factors, including the types of debts your company needs to address and whether your company qualifies as a “small business” under subchapter V. Today, most companies file under subchapter V because of the relatively modest costs and requirements involved.

2. Desirability of Alternatives

When considering a Chapter 11 filing, it is also important to consider the alternatives. There are several potential alternatives to a Chapter 11 bankruptcy, and if your company can achieve its financial goals through one of these alternatives, that could prove to be the best option.

3. Proposed Reorganization Plan

When pursuing a Chapter 11 bankruptcy, debtors have the opportunity to submit a proposed reorganization plan at the filing stage. This can have several benefits, and company owners and executives will want to work with their legal counsel to ensure that they submit a plan that is likely to receive approval while also maximizing the benefits of the bankruptcy process.

4. Strict Filing Compliance

When seeking the benefits of reorganizing under Chapter 11, companies need to ensure strict compliance with all applicable substantive and procedural filing requirements. In many cases, even simple mistakes can have drastic consequences, so it is critical to focus on compliance from the earliest stages of the process.

5. Anticipating Potential Hurdles

Finally, when pursuing reorganization under Chapter 11, company owners and executives should also work with their legal counsel to anticipate potential hurdles. Creditors can assert a variety of defenses to discharge, and there are circumstances in which they can seek relief from the automatic stay. By being aware of these kinds of issues—and addressing them proactively when necessary—company owners and executives can help ensure that the process is as streamlined, cost-effective and beneficial as possible.

Discuss Your Company’s Options with a Miami Chapter 11 Bankruptcy Lawyer for Free

If you would like to know more about the process of pursuing reorganization under Chapter 11, we invite you to get in touch. We work with companies of all sizes across Florida, and we have extensive experience guiding clients through the reorganization process. To schedule a free initial consultation with an experienced Miami Chapter 11 bankruptcy lawyer at Edelboim Lieberman, please call 305-768-9909 or tell us how we can reach you online today.