The business turnaround & bankruptcy kit

225 Pages·2003·2.87 MB·English

by  John Ventura

This publication is designed to provide accurate and authoritative information in re-
gard to the subject matter covered. It is sold with the understanding that the pub-
lisher is not engaged in rendering legal, accounting, or other professional service. If
legal advice or other expert assistance is required, the services of a competent pro-
fessional person should be sought.
Vice President and Publisher: Cynthia A. Zigmund
Senior Managing Editor: Jack Kiburz
Interior Design: Lucy Jenkins
Cover Design: KTK Design Associates
Typesetting: the dotted i
© 2003 by John Ventura
Published by Dearborn Trade Publishing
A Kaplan Professional Company
All rights reserved. The text of this publication, or any part thereof, may not be re-
produced in any manner whatsoever without written permission from the publisher.
Printed in the United States of America
03 04 05 06 07 10 9 8 7 6 5 4 3 2 1
Library of Congress Cataloging-in-Publication Data
Ventura, John.
The business turnaround and bankruptcy kit / John Ventura.
p. cm.
Includes index.
ISBN 0-7931-6044-8 (pbk. : perm. paper)
1. Bankruptcy—United States—Popular works. 2. Business
failures—Law and legislation—United States—Popular works. I. Title.
KF1524.6.V463 2003
346.7307′8—dc21
2002155466
Dearborn Trade books are available at special quantity discounts to use for sales pro-
motions, employee premiums, or educational purposes. Please call our Special Sales
Department to order, or for more information, at 800-621-9621, ext. 4404, or e-mail
[email protected].
Dedication
To Steve Gomez, my brother-in-law, a true survivor and a great guy
Acknowledgments
A heartfelt thanks to Kevin Muir with Turnaround Central in
Austin, Texas, and Wayne Fuquay with Wayne Fuquay & Associates in
Houston, Texas, for their willingness to share their information and in-
sights regarding the turnaround process. Thanks as well to Tony
Gerbino with Bridge Associates, LLC, in Houston.
Also, I want to extend a big thank-you to all my coworkers at my
law firm for their understanding and support while I was working on
this book.
Contents
Introduction ix
Chapter 1: Assessing Your Options When Your
Business Is in Financial Trouble 1
Your Business Is in Trouble If ... 2
Assessing Your Options 3
Professional Advice and Assistance Required 5
Reviewing Your Options 6
Overview of the Chapter 11 Bankruptcy Process 13
How a Turnaround Works 14
Chapter 2: Dealing with Stress and Emotion When
Your Business Is in Crisis 17
Recognizing the Signs of Too Much Stress 18
Don’t Give In to Self-Doubt 21
Keep Your Cool with Your Business’s Creditors 22
Help Your Employees through Stressful Times 23
Chapter 3: Saving Your Business with a Turnaround 27
Turnarounds and Reorganization
Bankruptcies: What’s the Difference? 27
Your Options for Accomplishing a Turnaround 29
How to Find a Turnaround Firm for Your Business 32
What’s Next? 35
Your Business’s Managers and Employees 37
Playing Detective 38
Putting Out Fires 39
The Turnaround Plan 41
Once the Turnaround Plan Is in Place 43
v
vi Contents
Chapter 4: Bankruptcy Basics 45
Reap the Most Benefits by Planning Ahead 46
How to Find a Bankruptcy Attorney to
Represent Your Business 49
Once You Have Some Attorney Names 50
Other Factors to Consider When You Are in the Market for a
Business Bankruptcy Attorney 52
What Kind of Bankruptcy Should Your Business File? 53
Beginning a Bankruptcy 55
Your Business’s Bankruptcy Estate 56
The Key Players in a Business Bankruptcy 59
The Automatic Stay 61
Creditor Proof of Claim Forms 63
The Initial Debtor’s Conference 64
The Creditors Meeting 64
In Bankruptcy,Some Debts Are More Important
Than Others 65
Completing Your Business’s Bankruptcy 67
Chapter 5: Using Chapter 11 Bankruptcy to Stay in Business 69
Before Your Business Files 69
When Your Business Is a Sole Proprietorship 74
Filing the Right Paperwork 76
Debtor in Possession 77
The Power of Chapter 11 Creditors 80
After Your Business’s Chapter 11 Begins 81
Motions to Lift the Automatic Stay 82
Filing Motions to Use Cash Collateral 82
The Creditors Meeting 83
Don’t Miss These Deadlines! 85
The Disclosure Statement 86
All about Reorganization Plans 88
Putting It to a Vote 90
A Cramdown—Your Business’s Last Hope
for a Successful Reorganization 92
Once the Plan Is Approved 93
Chapter 6: Ending Your Business through a Chapter 7
Liquidation Bankruptcy 95
Beginning Your Business’s Chapter 7 Bankruptcy 96
The Trustee in a Chapter 7 Bankruptcy 97
The Creditors Meeting 99
Creditor Claims and Objections 102
When Your Business Is a Sole Proprietorship 103
Completing the Chapter 7 Bankruptcy 104
Contents vii
Appendix A: Sample Chapter 11 Bankruptcy
Forms 107
Appendix B: Sample Chapter 7 Bankruptcy Forms 132
Appendix C: Initial Debtors Package for Chapter 11
Debtors 153
Appendix D: Reorganization under the Bankruptcy
Code—Chapter 11 (Publication of the
Bankruptcy Judges Division of the U.S.
Courts) 194
Glossary 206
Resources 209
Index 211

Introduction
As a bankruptcy attorney, I meet with the owners of financially
struggling businesses every day. Therefore, I know how stressful it is
when your business cannot pay all of its bills, its credit is drying up,
your best employees are jumping ship for more secure jobs, and you
don’t know which way to turn. When your business is in crisis, it can
be difficult to think straight so you can figure out what to do. That’s
why I wrote The Business Turnaround and Bankruptcy Kit—to ex-
plain your options for dealing with your business’s troubles and to pro-
vide easy-to-understand explanations of each option. Although most of
the information in this book assumes that your business is a small,
closely held corporation—a corporation that is not publicly traded—I
also provide a limited amount of information and advice specific to
sole proprietorships. However, if you want more information about fil-
ing bankruptcy as a sole proprietorship, see my book, The Bankruptcy
Kit, 2nd edition (Dearborn Trade Publishing, 1996).
Chapter 1 of The Business Turnaround and Bankruptcy Kit in-
troduces the options you have for dealing with a financially troubled
business. For example, to save your business, your options include fil-
ing a Chapter 11 reorganization bankruptcy or attempting a turn-
around, which is a nonjudicial process for reorganizing debt.
The first chapter also covers your options when you don’t want to
keep your business going or when saving it is not realistic. Those options
ix