Posts Tagged chapter 11

By Tom Polanski, EVP, eBrand Media and eBrand Interactive

Unfortunately there are an increasing number of companies seeking Chapter 11 protection. If your client is exhibiting some of the symptoms below, be very, very aware. If you think your client fully fits the paradigm below, in my opinion, try to extricate yourself from the relationship as quickly as possible, and don’t rationalize:

* Your client expanded rapidly in 2006-2007
* Payments are late
* The phone is never answered
* E-mail aren’t replied to
* Voice mail isn’t responded to
* Partial payments made
* Promises that the check will be sent next week
* Increased number of complaints lodged with BBB, on forums, and in social media
* Promises of an upcoming infusion of capital

Some of the above are obvious but its interesting how a few of my peers convinced themselves that all would be well…until their client filed for Chapter 11 protection. I think Jeff Harbaugh does an extraordinary job here in detailing what a Chapter 11 is, and the consequences thereof:

“A Chapter 11 is a “reorganization” bankruptcy. That is, it is filed with the assumption that the filer will use the protection of the court to reorganize its finances so that it can continue as a going concern.  That doesn’t always happen, but it’s the intention going in.

There are a number of schedules you have to file with the court when the bankruptcy occurs.  These included assets and liabilities, income and costs, a schedule of existing contracts and some others.  Typically, the owner of the business becomes the “debtor in possession” and is responsible for the continued management of the business and control of the associated assets.  He is in a position of fiduciary responsibility with the same powers and obligations as if a Trustee had been appointed to manage the business. He’s required to file the monthly reports, can hire attorneys, accountants, appraisers or other professionals to help with the case, and file tax returns.

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