Chapter 11 Subchapter 5 – Bankruptcy For Businesses

What is Chapter 11 Subchapter 5 Bankruptcy?

Financially distressed businesses typically cannot pay their debts on time, or at all, struggle to raise capital and are forced to borrow at sub-optimal terms, including high interest rates. Many are forced to direct receivable collections to lock boxes, which limits the funds available for their operations. Other signs include sudden and dramatic turnover of high-level employees and the loss of a key client(s). Often struggling businesses are involved in expensive litigation and/or large judgments, which distract leadership and syphon company resources.

At what point should a business consider hiring a bankruptcy or restructuring professional and what should they look for?

The earlier, the better. One common misconception is that a bankruptcy or restructuring professional need only be consulted as a “last resort” when a bankruptcy filing is imminent. To the contrary, when brought in at the early signs of financial distress, a bankruptcy or restructuring professional could be the key to avoiding a bankruptcy altogether.
There are many options at a company’s disposal to address the source of financial distress, and sometimes a resolu- tion is achieved through negotiating an out-of-court restructure with one, or a handful of a company’s creditors. Unfortunately, companies often seek help when many of the out-of-court options are no longer viable, or when crucial bridges with stakeholders have been burned