A strategic chapter 11 bankruptcy case can provide
crucial help to businesses facing delayed shipments of supplies and
inventory resulting from the port strikes and shutdowns, including:
• The Automatic Stay. A worldwide injunction goes
into effect immediately, preventing creditors from suing, collecting
collateral and even calling and harassing the business. This provides a
critical breathing spell.
• Adjust Payments to Creditors and Vendors. Repay
creditors in full or in part over time on a schedule that works in
light of delayed shipments and delayed sales.
• Preserve and Assert Claims. If the business
holds claims against third parties on account of delayed shipments,
these are preserved and can be asserted during or after the chapter 11
case. These can be difficult or impossible to assert
if the business is allowed to collapse.
• Obtain Operating Cash. Lenders are reluctant to
loan to a distressed company. However, lenders - including the
principals of the company - can make loans on a preferred and protected
basis through court-approved DIP financing in chapter
11.
To summarize, a central purpose of chapter 11 is to solve short-term cash flow problems, and it provides good tools to do so.
By Reno Fernandez, a partner with Macdonald Fernandez LLP, a law firm focusing on business bankruptcy, reorganization and commercial litigation. Macdonald Fernandez LLP helps businesses and individuals file for relief under the Bankruptcy Code throughout California, including Los Angeles, San Diego, the San Francisco Bay Area and the Central Valley, and the firm is a debt relief agency as defined under the Bankruptcy Code. Advertisement. Reno can be reached at (415) 362-0449 x 204 or reno@macfern.com.
By Reno Fernandez, a partner with Macdonald Fernandez LLP, a law firm focusing on business bankruptcy, reorganization and commercial litigation. Macdonald Fernandez LLP helps businesses and individuals file for relief under the Bankruptcy Code throughout California, including Los Angeles, San Diego, the San Francisco Bay Area and the Central Valley, and the firm is a debt relief agency as defined under the Bankruptcy Code. Advertisement. Reno can be reached at (415) 362-0449 x 204 or reno@macfern.com.