Lawyer Monthly - November 2022

In your experiences of assisting businesses, what do they often misunderstand about bankruptcy? Bankruptcy is often seen as a failure or measure of last resort, when in fact for many it can be a great opportunity. Often, a bankruptcy proceeding can arm the debtor with the necessary structure to accomplish its objectives, such as a sale free and clear of liens, assumption and assignment of a lease over a landlord’s objection, or restructuring debt service. The other big misconception that businesses have going into bankruptcy is that they need to fight everyone. Quite often, a successful bankruptcy is built upon picking and choosing your battles – or, in other words, knowing which creditors can settle out or otherwise be resolved to pave the way for a more consensual process. How can a properly executed bankruptcy assist companies and their owners in bouncing back? Bankruptcies can assist companies and their owners whether it is in a liquidation or reorganisation setting. In liquidation, the company remains in the driver’s seat and gets to lead the sale process. In reorganisation, the parties have a number of tools to utilise in getting back on their feet. First and foremost is the automatic stay, which helps hit the pause button on exacerbating circumstances. Second, the debtors have vehicles in place, subject to notice and a process, of selling property free and clear, assuming and even assigning a lease over a landlord’s objection, or alternatively rejecting unwanted executory contracts and unexpired leases, and other remedies to help reshape its operations. Third, a debtor may restructure some of its debt service to stretch payments out 68 LAWYERMONTHLYNOVEMBER 2022 Common Misconceptions of US Business Bankruptcy Thought Leader For many businesses, the threat of bankruptcy has become all too real over the past two years. Though emergency pandemic measures and economic stimulus have assisted many in the US, the fear of bankruptcy – and misconceptions surrounding it – has surged. In this feature, Daniel Etlinger tackles the subject of bankruptcy in greater depth, dispelling common myths and outlining how businesses and their owners can use bankruptcy to better themselves.

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