Plan for Success in Your Chapter 11 Reorganization

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PLAN TO GET IN AND GET OUT

Your goal in a Chapter 11 reorganization should be to “get in and get out.”  This is only possible by planning your case in advance.  See what goes into a successful exit strategy below.

WHAT MAKES A SUCCESSFUL EXIT STRATEGY?

Here are some of the common parts of an effective exit strategy—

  • Be prepared to make hard choices in your business—choices that will hurt a lot but which will allow you to confirm a fair reorganization plan.
  • Get your books and records in order before the case is filed.  Accurate information and accurate reporting during your case will be critical.
  • Prepare for emotional stress.  Leading a business through Chapter 11 will add new emotional stresses and challenges.
  • Do not hedge in making accurate and complete financial disclosure.
  • Plan for professional costs.  Typically the Debtor needs to employ both an attorney and an accountant.  Knowing how you will pay these professionals is a strong indicator of success.
  • Identify likely problem creditors and anticipate their legal and factual arguments.  Plan to counter their facts and arguments and expect to negotiate where possible to reach a deal with these creditors.

The planning you do with your attorney and accountant in advance should give you a strong feeling that you will succeed in the Chapter 11 reorganization process.  If not, expect that an experienced Chapter 11 attorney will tell you that you and your business are not well suited to reorganize in Chapter 11.

FACTORS THAT PREDICT SUCCESS IN REORGANIZATION CASES

Here’s what your attorney should be looking for in your case–

  • Business owners are realistic and willing to make the hard decisions
  • Business books and records are in order and accurate
  • Business owner/CEO is emotionally suited to operate the business
  • Strong ethics and morals exist
  • Parties know how the business will pay its professionals to get through the case
  • Attorney and business owners agree on how best to deal with problem creditors