Aldrich Law Firm, Ltd.
Aldrich Law Firm, Ltd.

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Chapter 11 bankruptcy may offer businesses a second chance

Businesses face many challenges, from economy changes to fierce competition. In many cases, company owners in Las Vegas and elsewhere may find themselves with struggling with too much debt, not enough revenue or both. Fortunately, before being forced to permanently close doors, companies have the option of restructuring their debt through Chapter 11 bankruptcy.

This type of bankruptcy, according to the Administrative Office of the U.S. Courts, is also known as the “reorganization” bankruptcy. Instead of liquidating assets to repay creditors and ruining the business, Chapter 11 allows companies to propose a plan for repayment and increasing profits. This the reason Chapter 11 is primarily used by businesses, particularly corporations.

In a bold move, Caesars Entertainment Operating Co. is suing its parent company, Apollo Global Management, ahead of its bondholders. According to Bloomberg, this strategy is hoped to allow the casino giant better control over its impending Chapter 11 lawsuit and, if possible, give it the chance to avoid going to court. Executives with Caesars are reasoning that it may allow them a better opportunity to settle billions of dollars in claims with the company’s creditors.

Often, Chapter 11 is not seen as a negative event by stockholders and others. Instead, it can be seen as a wise move to save a business. Companies are not necessarily facing serious trouble when they file for a reorganization bankruptcy, as well. Chapter 11 allows for an automatic stay that keeps creditors from pursuing collection while the company works out a repayment plan and additional moves to increase its revenue and chances for long-term success. As shown in the example involving Caesars Entertainment Operating Co., Chapter 11 and related strategies may be complex, and it is usually necessary to involve legal counsel.

John P. Aldrich
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