This page is devoted to business cases only.  Our experience has been that the attorney time involved in obtaining consumer workouts does not justify the possible results obtained.  They are just too expensive.

Out-of-Court business cases usually take the form of one of two transactions -- the Work-Out or the Assignment for the Benefit of Creditors.   Roughly translated, the Work-Out is the out-of-court equivalent of a Chapter 11 and the Assignment is the equivalent of a Chapter 7.  The advantages to the debtors and creditors is generally in the area of costs -- both are usually substantially less expensive than an in-court proceeding.  The disadvantage is the lack of the automatic stay.

Work-Outs are arrangements that the debtor makes with its creditors whereby the creditors generally agree to "stand still" and take no action while the debtor "works out" its debts with the creditors.  The agreement is is voluntary and no creditor can be forced agree.  In this respect it is different from a Chapter 11 where the majority of creditors can compel the minority to comply.

We find that work-outs are most effective where the debtor has reached agreements with its secured creditors and needs to get the cooperation of the unsecured creditors.   Since there is no "automatic stay" in a workout, the secured creditors would be able to proceed to foreclose on their property if an agreement with them had not been reached.

We initiate a work-out by calling a meeting of the creditors through the a neutral third party which we call the Out-of-Court Administrator.  The Administrator has the administrative functions of a Trustee but without the powers.  The only powers of the Administrator are those granted to it by agreement with the debtor and creditors.

Once the Administrator calls a creditors meeting, the client and a representative of our office meet with the creditors at the meeting.   We explain to the creditors the problems that we have experienced, our ideas as to the resolution of the problems, and request their assistance and advice in correcting the problems.  We request that the creditors form a committee from their members to work with us to come to a just resolution.  Usually the creditors agree.

From that point, the case proceeds much like a Chapter 11, but without any court intervention.  The client and the creditors' committee meet and discuss progress and possible plans for repayment of all or part of the debt.  The end result is a plan that is submitted to all creditors for approval.  We usually require a significantly high percentage of the creditors to approve the plan before the client is bound.  We require this because, if any creditors do not agree and proceed with collection efforts, we may be able to file a Chapter 11 case and have a plan already approved to present to the Court.  We also have other legal maneuvers to encourage any recalcitrant creditors to agree.

Our success rate with this procedure is roughly the same as a Chapter 11.  The main advantage to the client is that the attorneys fees are usually significantly less.

Assignments for the Benefit of Creditors are roughly the equivalent of a Chapter 7 liquidation.  Again, we use a selected person as our "liquidating agent."  The "liquidating agent" (also known as the Assignee for the Benefit of Creditors) liquidates the assets and delivers the results to the creditors pursuant to the plan.

In an Assignment, the client generally wants to go out of business and provide for an orderly liquidation of its assets.  There, generally, is no meeting with creditors -- the creditors simply receive their pro rata distribution from the liquidation of the assets.  Since an Assignment is an agreement, the debtor does not receive a discharge in an Assignment unless the creditors agree.