#42 CHAPTER 11 BANKRUPTCY Buyer Checklist You Need To Know Before You Spend Your Money. 60 Buyer-Beware Intelligence Points.

Legal Information Notice: This checklist provides general educational information only. It is not legal advice, does not create an attorney-client relationship, and may not apply to your jurisdiction or circumstances. Laws and deadlines vary. Do not rely on this checklist for a specific legal decision or deadline; consult a qualified attorney licensed in the relevant jurisdiction.

1. Chapter 11 is not simply “bankruptcy for big companies.”
2. It can involve substantial legal and administrative complexity.
3. Filing is only the beginning of the restructuring process.
4. Professional fees can become substantial.
5. Court processes can take considerable time.
6. A business may need ongoing financing during the case.
7. Cash-flow management becomes critical.
8. Creditor negotiations can be complicated.
9. Secured and unsecured creditors can have different interests.
10. Existing contracts can become central to the restructuring.
11. Leases can create important issues.
12. Employees and payroll obligations must be managed.
13. Taxes require careful attention.
14. Valuation disputes can become significant.
15. A proposed restructuring plan may not succeed.
16. Creditors can object.
17. Stakeholders may have competing interests.
18. Management may or may not remain in control depending on circumstances.
19. DIP financing can carry significant conditions and costs.
20. New financing does not guarantee eventual recovery.
21. A business can emerge from bankruptcy with a viable structure—or fail to reorganize successfully.
22. A reorganization plan should be evaluated economically, not merely legally.
23. Professional conflicts of interest should be understood.
24. The cost of continuing the case must be modeled.
25. The key question is “Can the reorganized business actually survive?”

B. PREMIUM BUYER CHECKLIST

BUSINESS DIAGNOSIS

☐ Current revenue
☐ Gross margin
☐ Operating expenses
☐ Cash position
☐ Debt
☐ Accounts payable
☐ Accounts receivable
☐ Tax obligations
☐ Lease obligations
☐ Employee obligations

CAUSE OF DISTRESS

☐ Temporary liquidity issue
☐ Structural profitability issue
☐ Excessive leverage
☐ Customer loss
☐ Industry disruption
☐ Operational failure
☐ Management failure
☐ Other

PROFESSIONAL TEAM

☐ Bankruptcy counsel
☐ Financial adviser
☐ Restructuring adviser
☐ Tax professionals
☐ Valuation support
☐ Other specialists

RESTRUCTURING

☐ Debt reduction
☐ Debt extension
☐ Asset sales
☐ Contract restructuring
☐ Lease restructuring
☐ New financing
☐ Equity restructuring
☐ Operational restructuring

SURVIVAL MODEL

Calculate:

Post-Reorganization Revenue

−

Post-Reorganization Operating Costs

−

Debt Service

−

Required Working Capital

=

Sustainable Cash Flow

STRESS TEST

☐ Revenue −10%
☐ Revenue −20%
☐ Higher financing cost
☐ Major customer loss
☐ Six-month recovery delay

FINAL QUESTION

Does the proposed restructuring solve the cause of failure—or merely postpone it?