In these unsettled times, Fox Rothschild has prepared a comprehensive Bankruptcy FAQ to help businesses understand their potential bankruptcy options, the notable features of the bankruptcy process, how to prepare for a bankruptcy filing, and alternatives to bankruptcy.  Items addressed in the FAQ include:

  • The differences between filing for bankruptcy under Chapter 11 versus Chapter 7.
  • An overview of the “automatic stay” that goes into effect upon a bankruptcy filing and that protects debtors from their creditors.
  • A discussion of the recently enacted Subchapter V of Chapter 11, which provides a more efficient and cost-effective restructuring option for qualifying small businesses.
  • Tips on how to prepare for a Chapter 11 filing and issues to consider (e.g. potential third party and insider liability).
  • A summary of how creditors are treated in bankruptcy.
  • The impact of a bankruptcy filing on a company’s employees.
  • The ability for a business to assume or reject leases and executory contracts in Chapter 11.
  • An overview of “preference claims” to recover payments made by the debtor to creditors during the 90 days before the bankruptcy filing (or one year before for insiders).
  • Alternatives to bankruptcy filing, including:
    • Taking advantage of low interest rates to obtain new financing (or refinancing)
    • Workouts
    • Assignments for Benefits of Creditors (ABCs)
    • Dissolution proceedings