A fellow being chased by creditors would be smart to give his fiancee' an expensive engagement ring. She'll be thrilled, and he'll be making a safe investment, since Virginia law specifically exempts wedding and engagement rings from attachment by creditors. Lawmakers have decided that, for public policy reasons, people should keep such property in the family. Better not divorce!
A religious couple might consider investing in a Guttenberg Bible, since the law also exempts the family Bible.
Animal lovers can rest easy, too. Creditors can't take the family pet, whether it's a dog, cat, squirrel or snake. As long as the debtor does not raise the animal for sale purposes, the creditor cannot take it.
Someone facing bankruptcy might not be in the frame of mind to dwell on mortality, but it's an opportune time to purchase a burial plot. The law also exempts this property as a matter of policy. Who said you can't take it with you!!
Investigate Credit Worthiness
* Call other creditors of applicant
* Call industry contacts
* Check with landlords and credit references
* Obtain a Credit Bureau Report
* Review Dun & Bradstreet Reports
* Study court records for information about: Judgments, pending litigation, title to real estate, liens on realty, and UCC financing statements
* Hire an investigator or attorney Have your CPA review financial records
***
The above article is not meant to replace legal counsel. To speak to an attorney, please contact Gross & Romanick directly by filling out their online form, emailing law@gross.com, or calling (703) 273-1400.
Showing posts with label bankruptcy credit. Show all posts
Showing posts with label bankruptcy credit. Show all posts
Friday, January 9, 2009
Thursday, November 6, 2008
Financing a Company in Chapter 11: Who Would?
Who would lend money, lease property or extend credit for supplies to a company in Bankruptcy? Why would anyone want to do that?! Who would want to provide financing to a company that has already mismanaged itself into bankruptcy? Answer: you may want to.
Inevitably a Chapter 11 debtor will require additional cash flow or extensions of credit. Because companies in bankruptcy need money, leases and supplies, if a creditor is willing to provide funds, offer a lease or extend credit, that creditor stands to obtain very favorable terms. Because few creditors are willing to enter into high risk investments, Congress enacted incentives under Section 364 of the U.S. Bankruptcy Code, which permits priority to such creditors over already existing creditors and administrative costs (the so called "super priority"), as well as providing security in the assets of the debtor.
Extending Credit
The potential creditor should obtain a copy of the company's bankruptcy schedules. The schedules will reveal the company's assets and liabilities. The creditor should also request all financial information that will assist in assessing the company's ability to repay the credit. Ask for balance sheets, income statements and monthly operating reports.
The potential creditor should try to place itself in the most secure position possible. The levels of security available range from unsecured credit that is paid back as an administrative expense prior to pre-existing unsecured creditors, to debt secured by a senior lien on property of the estate.
A creditor is most secure if it holds a senior lien on property of the bankrupt company. Be creative! You can hold a lien not only on real property, but also accounts receivable, equipment, inventory, etc. If the bankrupt company has real property with sufficient equity, a lender can get a lien senior to a pre-existing security interest. This is a unique opportunity for a lender to bypass perfected liens and Deeds of Trust, and to move directly into a first position. Of course, existing creditors may object to their loss of position at a hearing but the judge ultimately decides based upon the best interest of all the creditors.
At a minimum the creditor should demand a "super priority". A "super priority" will allow the creditor to be paid back prior to administrative claims such as fees charged by lawyers, accountants and other expenses incurred by the company to preserve the estate.
Conclusion
Opportunities for profit are available for those creditors who take advantage of the protection available. Furthermore, an infusion of credit or cash may preserve the bankrupt company to your long-term benefit.
***
The above article is not meant to replace legal counsel. For more information or to retain legal counsel, please contact Gross & Romanick by filling out their online form, emailing law@gross.com, or calling (703) 273-1400.
Inevitably a Chapter 11 debtor will require additional cash flow or extensions of credit. Because companies in bankruptcy need money, leases and supplies, if a creditor is willing to provide funds, offer a lease or extend credit, that creditor stands to obtain very favorable terms. Because few creditors are willing to enter into high risk investments, Congress enacted incentives under Section 364 of the U.S. Bankruptcy Code, which permits priority to such creditors over already existing creditors and administrative costs (the so called "super priority"), as well as providing security in the assets of the debtor.
Extending Credit
The potential creditor should obtain a copy of the company's bankruptcy schedules. The schedules will reveal the company's assets and liabilities. The creditor should also request all financial information that will assist in assessing the company's ability to repay the credit. Ask for balance sheets, income statements and monthly operating reports.
The potential creditor should try to place itself in the most secure position possible. The levels of security available range from unsecured credit that is paid back as an administrative expense prior to pre-existing unsecured creditors, to debt secured by a senior lien on property of the estate.
A creditor is most secure if it holds a senior lien on property of the bankrupt company. Be creative! You can hold a lien not only on real property, but also accounts receivable, equipment, inventory, etc. If the bankrupt company has real property with sufficient equity, a lender can get a lien senior to a pre-existing security interest. This is a unique opportunity for a lender to bypass perfected liens and Deeds of Trust, and to move directly into a first position. Of course, existing creditors may object to their loss of position at a hearing but the judge ultimately decides based upon the best interest of all the creditors.
At a minimum the creditor should demand a "super priority". A "super priority" will allow the creditor to be paid back prior to administrative claims such as fees charged by lawyers, accountants and other expenses incurred by the company to preserve the estate.
Conclusion
Opportunities for profit are available for those creditors who take advantage of the protection available. Furthermore, an infusion of credit or cash may preserve the bankrupt company to your long-term benefit.
***
The above article is not meant to replace legal counsel. For more information or to retain legal counsel, please contact Gross & Romanick by filling out their online form, emailing law@gross.com, or calling (703) 273-1400.
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