Checklist Checklist

Category: CHAPTER 11 BANKRUPTCY

  • #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?

  • #41 BANKRUPTCY LAWYERS 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. Bankruptcy is a legal process, not simply a way to erase debt.
    2. Not every debt is treated the same way.
    3. Some debts may survive the bankruptcy process.
    4. The choice of bankruptcy chapter can materially change the outcome.
    5. Eligibility requirements matter.
    6. Your assets matter.
    7. Your income matters.
    8. Your household circumstances may matter.
    9. Recent financial transactions can receive scrutiny.
    10. Transfers of assets before filing can create serious problems.
    11. Accurate disclosure is critical.
    12. Hiding assets can create severe consequences.
    13. Filing bankruptcy can have significant credit consequences.
    14. Bankruptcy does not necessarily stop every type of legal obligation.
    15. Secured creditors have rights involving collateral.
    16. Co-signers and guarantors can create additional complications.
    17. Bankruptcy may affect a spouse differently depending on circumstances and jurisdiction.
    18. Attorney fees are only one part of the economic cost.
    19. Court costs and other expenses may apply.
    20. A lawyer promising a guaranteed result should trigger skepticism.
    21. A lawyer should explain alternatives, not merely sell bankruptcy.
    22. You should understand what happens to your home, vehicle, business and other major assets.
    23. You should understand which debts are potentially dischargeable and which may not be.
    24. Do not wait until an imminent foreclosure, lawsuit or levy without understanding the timing implications.
    25. The most important question is “What exactly happens to my assets and debts if I file?”

    B. PREMIUM BUYER CHECKLIST

    YOUR FINANCIAL PICTURE

    ☐ Complete creditor list
    ☐ Secured debts
    ☐ Unsecured debts
    ☐ Tax debts
    ☐ Student/education-related debts where applicable
    ☐ Lawsuits
    ☐ Judgments
    ☐ Collection accounts
    ☐ Monthly income
    ☐ Monthly expenses
    ☐ Assets
    ☐ Retirement accounts
    ☐ Real estate
    ☐ Vehicles
    ☐ Business interests

    LAWYER

    ☐ Licensed in relevant jurisdiction
    ☐ Bankruptcy specialization/experience
    ☐ Experience with cases resembling yours
    ☐ Actual attorney handling case identified
    ☐ Fee structure in writing
    ☐ Court costs identified
    ☐ Additional services identified
    ☐ Communication process established

    ALTERNATIVES

    ☐ Negotiation
    ☐ Payment arrangements
    ☐ Debt management
    ☐ Debt settlement
    ☐ Sale of assets
    ☐ Restructuring
    ☐ Bankruptcy

    ASSET TEST

    For every significant asset:

    ☐ Current value
    ☐ Amount owed
    ☐ Equity
    ☐ Ownership
    ☐ Potential treatment under applicable law

    DEBT TEST

    For every significant debt:

    ☐ Creditor
    ☐ Balance
    ☐ Secured/unsecured
    ☐ Status
    ☐ Potential treatment
    ☐ Co-signer/guarantor

    RED FLAGS

    ☐ “Guaranteed discharge”
    ☐ “Everyone qualifies”
    ☐ Pressure to file immediately
    ☐ Refusal to explain alternatives
    ☐ Unclear fee agreement
    ☐ Instructions to omit information
    ☐ No explanation of asset consequences

    FINAL QUESTION

    What will my financial life look like 12 months after filing—not merely the day I file?