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In the United States today, business’ financial and operational structures are increasingly becoming more complex. Through a series of financial deals and acquisitions, companies are often knowingly or unknowingly beholden to numerous parties and creditors, many of whom have very different and competing interests in whether a business ultimately succeeds or fails. Consequently, finding solutions to a business’ debt problems has also become more complicated.

There’s no doubt that Chapter 11 bankruptcy remains a viable option through which a company may attempt to reduce debts and liabilities to regain or attain profitability. However, today some argue that a growing number of businesses, along with those financial entities that have a vested interest in them, are taking advantage of the protections the bankruptcy process provides without actually addressing or finding permanent solutions to a business’ underlying financial problems.

Traditionally, the Chapter 11 bankruptcy process was meant as a way for a struggling business to obtain protection from creditors while formulating and putting plans in action to “fix operational issues, offload bad contracts, and jettison failed divisions or projects.” However, with so many involved parties and investors all competing for their share of the pie, some corporate bankruptcies can quickly digress into a proverbial free-for-all where attempts to recover debts come at the expense and cost of a business’ employees and future success.

In order to prevent the latter, it’s crucial that a business’ leadership team all be on the same page with regard to a Chapter 11 reorganization plan. While, in many cases, a business will be forced to make some concessions during the bankruptcy process, a company’s basic values should never be compromised.

In order to protect and preserve these values as well as a company’s vision for continuing operations, it’s crucial to have a team of seasoned and competent legal professionals on one’s side.

Source: Miami Herald, “My View: Is Chapter 11 bankruptcy a sword or a shield?,“Joseph J. Luzinski, Oct. 31, 2015