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Management Maneuvers—Chapter 11
Reorganization
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In Chapter 11 the business typically remains in operation with
the goal of repaying creditors through a court-approved plan of
reorganization. The plan is basically a contract with your
creditors as to how they will be repaid, and from what source.
There’s no outside trustee appointed in Chapter 11, the
management team continues to run the company taking on the same
responsibilities as a trustee. |
 Steps in a Chapter 11
Reorganization: |
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 However, this doesn’t mean that
management is left unchecked—its actions and decisions will be
monitored by a number of outsiders including the creditors, the
examiner and the United States trustee. The creditors often form
a committee and hire lawyers to ‘consult’ with the management
team and ‘assist’ in the formulation of the plan—they’ll
investigate any questionable payments and activities.
Chapter 11 provides some relief from creditors so that you can
prepare a reorganization plan and have it confirmed by the
court. This plan could involve Cutting Costs, Slashing Costs,
Reinventing the Company, Warm Restart—or a combination of
several maneuvers aimed at cutting costs, generating revenues,
liquidating assets and paying off debts.
Chapter 11 filings often lead to shutdown, occasionally followed
by a Cold Restart, however, sometimes the reorganization works,
there’s a miraculous turnaround and the company re-emerges as a
viable stand-alone business
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