First Considerations for the Financially Distressed Business

This and the following posts have been copied or adopted from First Considerations for the Financially Distressed Business, published through a collaborative effort by the Minnesota Department of Employment and Economic Development Lathrop GPM.

Disclaimer to First Considerations for the Financially Distressed Business

This publication is intended to alert the reader to legal issues related to restructuring of financially distressed businesses. It is intended as a guide and not as a definitive source to answer your legal and business questions. It should not be relied upon for specific legal advice. Legal and other professional counsel should be consulted. Lathrop GPM LLP and the Minnesota Department of Employment and Economic Development, Small Business Assistance Office cannot and do not assume responsibility for decisions made based upon the information contained herein.

• Alternative to Bankruptcy – Out-of-Court Workout
  • Signs that Company Needs Restructuring
    • Runaway Expenses
    • Lack of Efficiency
    • Overextended Debt
    • Market Share Erosion
    • Rapid Business Expansion (Burn Rate)
  • Creditors Who Should be Restructured
  • Advantages of Out-of-Court Restructuring
    • Far Less Expensive
    • Avoid Messy Investigations/Litigation
    • No “Clawbacks” of Money–Preferential Transfers
    • Faster Process
  • Disadvantages of Out-of-Court Restructuring
    • Lacks Sense of Finality
    • No Automatic Stay
    • Sales Will Not be Free and Clear of Liens
    • Inefficient With Too Many Creditors
• In-Court Restructuring
  • General Overview
    • Eligibility Generally
  • Types of Bankruptcy Cases
    • Chapter 7 – Liquidation
    • Chapter 11 – Large Reorganization
    • Chapter 12 – Family Farmers Reorganization
    • Chapter 13 – Repayment Plan
  • Discussion of In-Court Restructuring (Chapter 11)
    • Debtor Eligibility (Chapter 11)
    • Bankruptcy Estate
    • Automatic Stay
    • Financing in Chapter 11
      • Debtor-in-Possession (DIP) Financing
      • Cash Collateral
    • Business Operations in Bankruptcy
    • Executory Contracts and Unexpired Leases
      • Rejection
      • Assumption
      • Assumption and Assignment
    • Treatment of Claims
      • Basics of Chapter 11 Plan
      • Requirements of Plan
      • Disclosure Statement
  • Small Business Reorganization Act