Reorganizing A Small Business With Chapter 11 Bankruptcy

25 Feb Reorganizing A Small Business With Chapter 11 Bankruptcy

Never give in. Never give in. Never, never, never, never–in nothing, great or small, large or petty–never give in, except to convictions of honor and good sense. Never yield to force. Never yield to the apparently overwhelming might of the enemy. – Winston Churchhill

Some “experts” have commented on how hard it is to reorganize a business in Chapter 11. However, it is possible. Recently, we have been representing a small manufacturer of industrial equipment. They had well under a million dollars in debt. Just under 10 employees. The bank, for unknown reasons, wanted them out of business. The bank would have lost quite a bit of money in the process. The bank must have had its reasons but they were unclear to say the least.

In a “small business chapter 11 case” there is no creditors’ committee. There are, however, plenty of issues which had to be worked out with the bank. The debtor needed to raise new capital, cut costs, made a deal with the landlord, got new orders and saved his company – a company which had achieved a national reputation for quality in its 50 years in business.

The Plan and Disclosure Statement now has been agreed upon by the Bank. It has been conditionally approved by the Bankruptcy Court and confirmation is expected in the not-too-distant future. It cost more than we would have liked but still, our client and all of its jobs will be saved. And all of its customers will enjoy our client’s high quality products.

Not every lawyer will handle chapter 11 cases. But many will. Not only that, but Chapter 11 is not the only alternative for reorganizing small businesses in trouble. Informal work-outs or compositions are also possible. And sometimes, creative solutions can be developed with the cooperation of the bank or other secured lender.

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Jay S. Fleischman is a bankruptcy lawyer with offices in Los Angeles and New York. He can often be found on Google+ and Twitter, where he shares information about consumer protection issues and personal finance.

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