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ALTERNATIVES TO BANKRUPTCY

Bankruptcy isn’t the solution to every financial problem. Bankruptcy has its limitations, and its costs. Accordingly, before we recommend proceeding under the Bankruptcy Code, we consider whether the financially-troubled client’s objectives can be met by other means.

Can the burden of debt which threatens the debtor be eased through refinancing? Can provision of greater information, additional safeguards or greater security encourage creditors to give the client the breathing room which is needed? Can an intelligent presentation to creditors concerning the reality of a bankruptcy proceeding convince them that would not be in their interest? If the debtor is a business, can relations be restructured, or a work-out plan reached, analogous to what might result in bankruptcy but without the expense of a Chapter 11 or Chapter 12 proceeding? If liquidation is necessary, can that objective be met through an assignment for the benefit of creditors?

These are the kinds of factors which counsel should consider for their financially-troubled clients, but often do not. Quality counsel may conclude that a bankruptcy filing is appropriate, but they should never assume that that is necessarily the proper course.