Restructuring & Creditor Rights

Receiverships offer a flexible, cost effective, and efficient way for a distressed business to liquidate its assets. A bankruptcy offers a systematic and formal process with protections to debtors and creditors. What happens at the intersection of receivership and bankruptcy depends upon the type of receivership, the amount and type of debt, the style of claims – secured or unsecured – that may be more effectively pursued by the receiver or the bankruptcy trustee, and the existence of claims that may only be pursued in bankruptcy. Practitioners should be aware of these differences before determining the proper route for their client.

The law governing security interests is technical and can be complex. Any business or entrepreneur who is asked to give a security interest to secure a loan or is loaning money and wants to secure repayment should consult with an experienced attorney for assistance with protecting their interests.

Congress enacted Subchapter V to streamline the chapter 11 bankruptcy process by which small business debtors organize and rehabilitate their financial affairs. The traditional Chapter 11 process is generally established for larger businesses. For smaller entities, the traditional chapter 11 process can be cumbersome and expensive, which can limit access to the benefits of reorganization. The Subchapter V process is intended to streamline the chapter 11 process for entities with debt under $7,500,000. There are several financial and temporal advantages for a Subchapter V debtor. First, there is no requirement that a creditor’s committee be appointed, thereby relieving the debtor of costs associated with paying the committee’s professionals. Second, the debtor need not make quarterly fee payments to the United States Trustee, which can be substantial in a traditional chapter 11 case. In a Subchapter V case, there is a panel trustee that is appointed to assist debtor’s counsel and creditors to reach a consensual plan. Third, Subchapter V plans are not subject to the absolute priority rule. In other words, in a traditional Chapter 11 the debtor’s equity holders may not retain any interest in the debtor if creditors are not paid in full, absent agreement by all creditors or significant new value cash contributions by the owner. Subchapter V has eliminated the absolute priority rule, and as a result the debtor’s equity holders may continue to retain their equity interests without providing new value, even if the debtor’s creditors are not going to be paid in full. Fourth, and most importantly, a Subchapter V debtor may confirm a plan without any creditor acceptance. In a traditional Chapter 11 at least one impaired class of creditors is required to accept the plan. This is a significant change, because in a Subchapter V proceeding, if the plan provides that all the debtor’s projected disposable income over the course of the plan is dedicated to repayment of unsecured creditors, the plan can be confirmed over the objection of creditors and without any creditor approval. Fifth, in a Subchapter V only the debtor itself may propose a plan. In other words, a competing plan cannot be submitted by a creditor. The timeline for proposing a plan is 90 days after filing for the bankruptcy. This helps move the bankruptcy along swiftly and further reduce administrative costs. A chapter 11 bankruptcy filed under Subchapter V is an extremely efficient and effective means by which to reorganize and return a company to profitability.

Our attorneys assist individuals and business owners in a wide array of transactions. We understand that each business is unique, and we focus on proposing and implementing the proper solution for the challenge. Whether it is forming a new business, drafting a purchase agreement, or guiding you through a buy-out, we are here to assist you with your business needs. While all business transactions carry inherent risks and unknown variables, we provide practical, innovative, and modern solutions.

We offer a unique understanding of the creditor and debtor prospective in every business transaction. In other words, simply drafting documents to memorialize your goal is only one element of our services. We will counsel you on strategy, asset protection, and special drafting considerations to protect you and your family’s assets.

During a bankruptcy case, trustees, creditors, and debtors may commence litigation, known as an adversary proceeding. The adversary proceeding process most often used when there may be voidable transfers, fraudulent conveyances, or non-dischargeable debts. These transactions often involve payments made to creditors within the 90 days preceding the filing of a bankruptcy, known as the preference period. The adversary proceeding may also be brought to question the dischargeability of certain debts.
At Keller & Almassian, we have handled numerous adversary proceedings for creditors and debtors, and and obtained positive results for our clients. We recognize the importance of efficient and cost-effective litigation. We stand ready to serve trustees, creditors, or debtors who want to pursue an adversary proceeding in bankruptcy.

We offer a unique understanding of the creditor and debtor prospective in every business transaction. In other words, simply drafting documents to memorialize your goal is only one element of our services. We will counsel you on strategy, asset protection, and special drafting considerations to protect you and your family’s assets.