Workouts of Debt Problems with Banks
With the careful use of the customer’s financial information, we can obtain reduction of loans amounts or other financial obligations. This often involves a “workout” where our client’s financial obligations are adjusted by agreement so that the client can survive and pay the creditor on the agreed upon, revised terms.
When businesses are experiencing cash flow problems, a natural tendency of an owner is to stop communications with lenders or vendors. But this is precisely the time where we can help communicate the facts to the lender so that the lender is informed and assured that a consensual workout will succeed.
A business owner is often the key to the lender or supplier recovering anything on its claim. So there is a tremendous opportunity for negotiations and an amendment of the loan terms that benefit both the borrower and the lender in the long term.
Chapter 11 Business Reorganizations
When the number of claims against a client makes a workout impossible, Perkins Olson represent clients in bankruptcy reorganizations under Chapter 11 of the United States Bankruptcy Code.
A Chapter 11 bankruptcy filing involves the “automatic stay”, which is a Bankruptcy Code requirement that prevents creditors from taking collection actions against the bankruptcy debtor. The automatic stay provides critical breathing room for a distressed business to restructure and then to file a plan of reorganization.
We have reorganized a wide range of businesses in chapter 11, including business involved in nursing homes, car repair, commercial real estate, apple orchards, and hotels.
Chapter 7 Bankruptcy
We represent individuals (both business people and other individuals who have consumer debts that they cannot pay) in bankruptcy filings under Chapter 7 of the United States Bankruptcy Code.
A Chapter 7 filing is a relatively quick and inexpensive procedure for eliminating debt when the individual is insolvent. The individual files the bankruptcy petition and a trustee is appointed by the Bankruptcy Court to liquidate any non-exempt property. Both state law and the Bankruptcy Code allow an individual to retain certain assets such as a house, vehicle, tools, and personal belongings up to certain values.
If the debtor has assets that are not exempt, then we often negotiate on behalf of the client with the trustee to allow the client to settle with the trustee so that the client can retain the assets.
Bankruptcy law requires that the Chapter 7 debtor have income below certain proscribed levels. So, before the Chapter 7 bankruptcy is filed, Perkins Olson works with the client to make sure that their income qualifies them for a Chapter 7 bankruptcy.
Chapter 13 Bankruptcy
Individuals in Chapter 13 bankruptcy proceedings are well represented by Perkins Olson. In a Chapter 13 proceeding, the client retains his or her assets and files a plan of repayment that calls for payments to be made to a trustee over a period of 5 years.
The client’s ability to have regular income necessary to fund the plan is always a critical issue in the Chapter 13 proceeding. Another key issue is the value of the client’s assets, as that value is used to determine how much is to be repaid under the plan.
We work carefully with the client to design a plan that is feasible for the client and in compliance with the Chapter 13 requirements.
Representation of Creditors and Unsecured Creditor Committees
We represent creditors in collection actions, including bankruptcy proceedings.
In larger Chapter 11 cases, we represent creditor committees. These are committees that represent the interests of the unsecured creditors in the Chapter 11 proceeding.