There are many reasons why a company might be experiencing financial distress, including overwhelming debt, cash flow problems, substantial litigation claims, and/or economic downturn. Companies sometimes use Chapter 11 as a vehicle to address these issues, especially since Chapter 11 allows the company to reorganize and continue as a going concern. However, Chapter 11 is an expensive process and may not be the best option for a financially distressed company.
Troutman Pepper Locke's Creditor’s Rights Toolkit is a series that provides practical insights to help creditors confront the challenges of commercial bankruptcy.
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