FAQ

What is Chapter 11 Bankruptcy?

Chapter 11 bankruptcy, is intended primarily for the reorganization of businesses with heavy debt burdens. It allows the debtor to propose a plan for profitability post-bankruptcy, which includes reducing costs and seeking new sources of revenue, while temporarily holding creditors at bay. Some debtors also file and immediately propose to sell substantially all their assets via Bankruptcy Code Section 363.  Under Section 363(f), a bankruptcy trustee or debtor-in-possession may sell the bankruptcy estate's assets "free and clear of any encumbrances, providing huge benefits for buyers and sellers.”

What is Chapter 11 Bankruptcy?

In recent years, many debtors have abandoned traditional Chapter 11 filings and instead opted for prepackaged or prearranged Chapter 11 filings. In prepackaged cases, the debtor can solicit a plan of reorganization in advance of a filing, because there is agreement among institutional creditors on the treatment of their claims and most of the creditors will be paid in full. A goal of the prepackaged Chapter 11 is to maximize the effects of a bankruptcy in a minimum amount of time, resulting in case and cost efficiencies which benefit both creditors and debtors. 

How to prepare for a Chapter 11 bankruptcy filing

For a company facing a Chapter 11 filing, the primary objectives are reasonably clear: utilize the bankruptcy process to reorganize or sell assets – and emerge as quickly and successfully as possible. However, and rightly so, most companies do not possess the in-house expertise and resources required to navigate the often-complex regulatory and legal intricacies of a Chapter 11 bankruptcy. So, in addition to legal, financial and other advisors, a claims and noticing agent is often required and retained. Once considered primarily for clerical tasks, a full-service claims agent today advises on and manages critical elements of their clients’ restructuring cases, most often in these areas essential to bankruptcy preparedness:

  1. Pre-Filing and Post-Filing Consultation
  2. Solicitation
  3. Noticing and Claims Management
  4. Virtual Data Rooms
  5. Strategic Communications

Failure to properly prepare and execute in these areas can result in additional cost, unnecessary reputational damage, irrecoverable losses, crippled vendor and customer relationships, and loss of talent which may be further exacerbated by substantial, unanticipated expenses.

The debtor company, and its advisors, will usually have a clear idea of the legal, operational and financial path to a successful Chapter 11 restructuring. However, it still risks significant delay that can potentially jeopardize the restructuring if it does not consider the administrative aspects of the process. It is in this area that a claims and noticing agent like Epiq can make a difference in a successful reorganization.


 

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