Dispelling common misconceptions about US business failure
In this article, Daniel Etlinger dives deeper into the subject of bankruptcy, dispelling common myths and explaining how businesses and their owners can use bankruptcy to improve themselves.
In your experiences helping businesses, what do they often misunderstand about bankruptcy?
Bankruptcy is often seen as a failure or a measure of last resort, when in fact for many it can be a great opportunity. Often, a bankruptcy proceeding can provide the debtor with the structure necessary to achieve its objectives, such as a sale free and clear of all liens, the assumption and assignment of a lease despite a landlord’s objection or debt service restructuring.
The other big misconception that companies fail is that they have to fight everyone else. Very often, successful bankruptcy hinges on picking and choosing your battles – or, in other words, knowing which creditors can settle or otherwise be resolved to pave the way for a more consensual process.
How can a properly executed bankruptcy help businesses and their owners bounce back?
Bankruptcies can help businesses and their owners, whether in liquidation or reorganization. In liquidation, the company remains in control and directs the sale process. During a reorganization, the parties have a number of tools to get back on their feet.
First and foremost is the automatic stay, which helps hitting the pause button in aggravating circumstances. Second, the debtors have put in place means, subject to notice and process, to sell the property freely and clearly, to assume and even to assign a lease over the objection of a landlord, or yet to dismiss unwanted enforceable contracts and unexpired leases, and other remedies to help reshape its operations. Third, a debtor can restructure part of their debt service to spread payments over time or obtain other modifications to provide needed relief.
Bankruptcy is often seen as a failure or a measure of last resort, when in fact for many it can be a great opportunity.
What distinguishes Chapter 7 and Chapter 11 bankruptcy, and what determines whether one or the other is best suited to a business’s needs?
The distinction between a Chapter 7 and a Chapter 11 comes down to one simple word: control. In a Chapter 11, the debtor retains control of its operations and, subject to some oversight, keeps day-to-day operations in their normal course. To determine which path is best for you, the first question is whether the company wants to continue or close its doors. If it’s the first, then a chapter 11 would be best. If the latter, the business must evaluate cost, schedule, control and other factors in between.
What should a company be aware of when preparing to file for bankruptcy? What special preparations should he make?
A company must be aware of the moment of its bankruptcy. Too late and even the most skilled bankruptcy practitioners cannot resuscitate a doomed case. Too early and the exit path may not have fully developed.
A second consideration, in particular, would be to declare bankruptcy with a sufficient “war chest” to finance the necessary work. At a minimum, this means completing primary bankruptcy, but it should also mean early adversaries or contested issues with particularly contentious creditors to ensure there is enough to keep professionals engaged.
What advice would you give to a less experienced bankruptcy attorney who is about to assist a company with bankruptcy proceedings?
A great bankruptcy attorney not only helps navigate the case directly, but helps the entire team as well. A successful bankruptcy may depend on the contributions of a CPA, real estate agent, special counsel and more. An experienced bankruptcy attorney can help you with everything from setting up professionals and communicating between members, to supervising projects to make sure everyone is rowing in the same direction.
What impact do you expect Water Street to have on the Tampa bankruptcy market?
Water Street can actually act as a deterrent to Tampa’s bankruptcies because it’s sure to stimulate growth and the economy. That said, we still couldn’t be more thrilled with the project! Water Street seeks to showcase cutting-edge technology to achieve both form and function. Among some of its features, Water Street deploys DAS (Distributed Antenna System) or small cell coverage to improve onsite cellular service, an open and secure WiFi network architecture, smart street lights that connect to emergency management, digital signage, smart parking and even smart waste management systems.
Daniel Etlinger, Partner
606 East Madison Street, Tampa, Florida 33602, USA
Tel: +1 813-229-2800 | +1 585-733-9792 (Cell)
Fax: +1 813-405-4046
Email: [email protected]
Daniel Etlinger is a partner of Jennis Morse Etlinger in Tampa, Florida. He focuses his practice on transactional representation, particularly in matters of commercial bankruptcy, corporate law, financial services and real estate law. He has authored several articles on bankruptcy issues and was recently a panelist at St. Leo’s University presentation on “Re-Imagine Your Future Under Subchapter V: A Chapter 11 Survival Tool” and participated as a as guest lecturer at the bankruptcy of Stetson University College of Law. Classes.
Jennis Morse Etlinger is a Tampa and Sarasota-based law firm focused on producing the best results for its clients. The team listens carefully and understands the various elements of a client’s life that may apply to their legal problem, then strategizes to achieve those goals, harnessing their vast experience to provide valuable holistic legal solutions to long term. The firm focuses on bankruptcy and insolvency, commercial litigation, and complex transactions and acquisitions.