BANKRUPTCY SUPPORT


BANKRUPTCY SUPPORT


There are different types of bankruptcies. An ongoing business bankruptcy is called a Chapter 11 bankruptcy. A large percentage of small company Chapter 11’s fail. One major cause is that the cost and time impact of a Chapter 11 bankruptcy can be immense to a small or medium-sized company. Most often, it’s also a blindness by the owner or management team who serve as the debtor in possession. They do not know what he, she, or they do not know. They continue with an element of the organization below par, and often with an incomplete or flawed business strategy. They are tied to past relationships and thought patterns. They fail to think through the response of competitors as well. Strategy is a crucial element at all stages of a company’s life—whether when at the top or struggling to survive.

SOS can assist with identifying the root causes of past issues with an unbiased and trained eye. We can develop or vet the financial reports that go into the court. We are most adept at developing the strategy and analysis that then goes into a future go-forward plan and its financial pro-forma. And finally, a third party is often better at negotiating with creditors than the debtor or debtor organization.


Bankruptcy Support Case Studies


A Last-Minute Reprieve

An Idaho farmer’s son talked his father, who had leukemia, into developing a housing project out of the 100-acre family farm that had been in the family for several generations. The son found a developer from Utah. The developer entered a multi-million-dollar purchase contract for the family farm with $5,000 down in a title company. The farmer then decided to build his wife her modest dream home. The housing market crashed. The developer defaulted on the contract. The developer then convinced the farmer and his wife that the developer had changed the land value to now be worth $20 million. The developer proposed to give up his rights to the land for $2 million secured by a first deed of trust with 6 months to pay. The farmer agreed; but then found the platted land had no development value due to the real estate market bubble burst. The farmer lost the land to the developer, with no payment from the developer. The farmer was also facing the final stages of foreclosure on his dream home. A few days before the sheriff’s sale, SOS was contacted. SOS filed a bankruptcy for the farmer to give him is day in court with the developer. The farmer lost the farm due to solid contracts by the developer in the previous negotiations with the farmer. But this allowed time for SOS to find a private buyer for the farmers house which allowed a life estate for the farmer and his wife. Upon the death of the farmer, SOS sold the farmers house, split the profit made for the financier with the widow and then put her into a senior subdivision home in her name fully paid off.


Friendly Creditor

A mid-sized contractor went into default with its bank. The bank brought in a turnaround professional out of Chicago. The contractor engaged SOS to interact with the Chicago firm. The Chicago turnaround firm took an aggressive liquidation stance. SOS believed there was a probable future for the contractor in a go-forward plan. The bank took aggressive liquidation efforts. SOS arranged a private financing portfolio to buy out the bank loan. The contractor is presently operating successfully several years later. (Note: the turnaround industry is not rewarded by creditors to defend ongoing operations but rather is pressured to liquidate companies. There is no reward for a turnaround firm to take a go-forward stance with a creditor. SOS, however, feels there is a place for liquidation and a place for on-going operations).