Mark Samson, Getzler Henrich managing director, and Julie Dyas, an attorney at Halperin Battaglia Raicht, discuss alternatives to Chapter 11 filings. While bankruptcy can be an effective tool, the price to file is costly. Just the retainers for professionals in a small case could be substantial,as the debtor often needs both an attorney and financial advisor. The end result can easily be in the region of $500,000 to $1,000,000.
There is also the emotional aspect of the owners appearing in court and publicly disclosing monthly financial information. In addition, the majority of companies filing Chapter 11 do not come out of Chapter 11 if they do not have an exit strategy, versus a pre-pack, whereby companies already have a plan and decide that it is best to consummate the plan with the protections Chapter 11 provides. An alternative to Chapter 11 is a composition agreement, which is an out of court restructuring plan.