ALTERNATIVES TO BUSINESS BANKRUPTCY
There are two common non-bankruptcy alternatives for a financially distressed business. The first is an out-of-court workout, which, if successful, would allow the business to continue to operate without court supervision. The second is an assignment for benefit of creditors, which is a vehicle for liquidating the business outside of a bankruptcy with minimal state court supervision.
One of the most popular alternatives to a bankruptcy proceeding is an out-of-court workout or restructuring. Either a business client is unable to make its monthly interest or principal payments under a commercial loan or that loan has matured and is due in full. Ms. Mehdipour will work closely with lenders to try and reach an agreement for more favorable, feasible terms over a longer period of time. This generally allows the business an opportunity to get back on its feet in order to meet its obligations.
General Assignments for the Benefit of Creditors (ABCs)
Functionally, this is an informal chapter 7 liquidation, but it is done in state court under the laws of that particular state. However, the process is much less cumbersome than a bankruptcy. The business chooses an assignee (or trustee) to come in to liquidate the assets of the business. This can be an appealing option over a bankruptcy proceeding because it is generally less costly. The downside is that an ABC is a not designed for reorganization or rehabilitation. It is purely a liquidation where business owners will give up complete control. Similar to a bankruptcy, there are reasons where creditors can object to the assignment.
Throughout Ms. Mehdipour’s career, she has not only represented both the assignor/businesses and the assignees in order to effectuate an orderly wind-down of the businesses, she has also served as the Assignee or fiduciary responsible for the liquidation (in unrelated cases).