Bankruptcy is often not a viable option. This occurs in situations in which either there are no assets available for distribution to creditors or in situations in which the costs of such a filing are determined to be excessive and not the best way of protecting the debtor’s interest or of producing a maximum recovery for creditors. The costs of filing a bankruptcy, including filing fees, legal costs and creditor costs are often expensive. The ability of a creditor’s committee or a trustee in bankruptcy to investigate into affairs can be unduly intrusive. For that reason, the insolvency and bankruptcy group at Zeldes, Needle & Cooper, P.C. has often avoided bankruptcy filings in favor of out of court workouts. Such workouts are always less expensive than bankruptcies and avoid intrusive investigations into the activities of the principals of the debtor entity.
In order to make an out-of-court workout in lieu of a bankruptcy viable, the workout must be totally transparent. Creditors are contacted and are given disclosure of all potential assets, potential recoveries, legal issues involved, disputes and history. Often a meeting with creditors or a creditor’s committee, or even meeting with the largest creditor, is established to make certain that transparency is maintained and full disclosure is granted. By utilizing an out of court workout, creditors generally have reduced their costs in recovering funds, and the since the debtor is spending less money than the cost of a bankruptcy, the debtor is able to share some of that savings to give the creditors a greater recovery. A workout also avoid the necessity of filing a bankruptcy with all of the concomitant bad credit and bad history involved.
ZNC’s bankruptcy and workout attorneys have used workouts in many situations. Recently it resolved problems for a Fairfield County “Gold Coast” home builder, a Naugatuck mechanical company, a Westport developer and others. Our insolvency group consisting of Richard Zeisler, James Verrillo and Maximino Medina, Jr. have had significant experience in out of court workouts and have successfully resolved creditor claims with major national corporations including real estate development firms, manufacturing operations, real estate developers and financial entities.