Q: What is a Chapter 11 bankruptcy?

A: It is one tool, but perhaps the most dramatic remedy, in the toolbox of restructuring attorneys. Chapter 11 is the business reorganization section of the U.S. Bankruptcy Code. Most corporations, LLCs and other business entities are eligible to file for bankruptcy protection in one of two places: the state where they were created or the site of their principal place of business/assets.

Q: Why do companies file for bankruptcy?

A: Some of the most common reasons to file for bankruptcy include:

As a corporate officer or director, the only way to take a bad situation like bankruptcy and make it worse is to be confronted with personal liability for the company’s debts, when you could have taken simple steps to position yourself better. Senior management must pay close attention to specific responsibilities and the resulting potential for liability when insolvency is on the horizon. This is especially important during the COVID-19 pandemic when bankruptcies are on the rise.

Hoard Cash

As businesses continue to feel the impact of COVID-19, many vendors and service providers should be aware what actions they should take if their customer files for bankruptcy. Here are several key concepts to know if you are a vendor or supplier:

The following provides guidance on managing private equity-owned portfolio companies in distress: