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Best Chapter 11 Alternatives

Before I get into Chapter 11 alternatives, it's critical that you understand what a Chapter 11 strategy involves and why we want to avoid it, if possible.

Chapter 11 bankruptcy involves a federal judge, your creditors, your attorney and the creditors' lawyers. You can see, it's a complicated collection of people, and a lot of costs. The judge will declare an automatic stay, keeping creditors from seizing your assets or filing suit for payments. Creditors are also restricted from calling or harassing you for payment.

During Chapter 11 bankruptcy, you continue operating your business on a daily basis. You remain in control, as "Debtor In Possession" (DIP). But if creditors are concerned that you might flee with company assets, request that the judge assign a trustee to run the company.

Although as DIP you continue to run the daily operations, the judge oversees your management. Any major decisions must be cleared through the judge. You are required to create the Chapter 11 reorganization plan, which outlines the repayment to secured and unsecured creditors and revises your balance sheet.

The typical end result:

1. Creditors own your company.
2. You pay $25,000 to $75,000, maybe more.
3. Owners or equity holders end up with nothing, nada, zero.
4. If you’re the owner/president, better look for a job.

See? If you can avoid Chapter 11 and rescue your business without it, you will be much better off.

Here are two of several Chapter 11 alternatives:

You need to look closely at these alternatives. They avoid the stigma of bankruptcy, and are much less costly.

Chapter 11 is a hotbed of legal maneuvers, moves and countermoves by both parties. All these ploys cost you time and money. A competent bankruptcy lawyer alone will want at least a $10,000-20,000 retainer to handle your Chapter 11.

And after all that, 90% of Chapter 11 Bankruptcies fail (converting to a Chapter 7 liquidation).

Other Chapter 11 Alternatives will be in my weekly e-mails and coaching sessions.

But there's more to understand...

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