February 03, 2012
/24-7PressRelease/ -- Many businesses suffer during economic downturns. Some businesses choose filing for
Chapter 11 bankruptcy as a means of reorganizing their affairs.
An essential part of helping a business regain solvency through a Chapter 11 case is the turnaround, or reorganization plan that the company files and for which it seeks court approval. A recent survey showed that companies increasingly have such plans in place before they commence a Chapter 11 bankruptcy case.
Frequency of Turnaround Plans
A survey by AlixPartners LLP released in June of 2011 showed that in 2010, 52 percent of large companies filing for Chapter 11 utilized "prepackaged" filings, wherein the debtors had already negotiated with creditors, obtained post bankruptcy-petition financing and prepared an exit plan before they filed their bankruptcy petitions for relief. This number is a sharp increase from the 21 percent of companies who filed plans with their petitions for relief in 2009.
Of the 80 bankruptcy lawyers, investment bankers and financial managers the survey consulted, 97 percent reported they believe that such prepackaged filings are now a permanent part of Chapter 11 bankruptcy. Forty-nine percent of the respondents expected the number of businesses to have a turnaround plan in place before filing for Chapter 11 bankruptcy to make up half to three-fourths of Chapter 11 filings in 2012.
Benefits of a Turnaround Plan
By engaging in negotiations and having a plan in place before filing the petition for relief, a company may decrease the time spent in bankruptcy court and soften the detrimental effects that bankruptcy may otherwise have on the company's creditors and employees. Therefore, a business puts itself in a better position to emerge from bankruptcy, and increases the likelihood that it will return to profitability.
By negotiating with creditors before filing, a company also lessens the risk of losing control of its own affairs while in bankruptcy because creditors that may otherwise object to a plan, or seek to file their own, competing plan, have already agreed to the company's proposed plan for the business to reorganize.
How an Attorney Can Help
An attorney can be invaluable in helping to organize a turnaround plan and guide a company through the bankruptcy process by use of a "pre-pack". An experienced business bankruptcy lawyer can negotiate with creditors on behalf of the business and help make sure that the company formulates a plan of reorganization that the bankruptcy court will likely approve.
If your business needs to restructure its finances, do not hesitate to contact an experienced business bankruptcy attorney who can inform you of all of your options.
Article provided by Rosen & Winig PA
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