Chapter 7—The purpose of a Chapter 7 bankruptcy is to allow a company to obtain a fresh start, free from creditors and free from the pressures of overwhelming debt. Basically Chapter 7 is a plan for corporate financial dissolution. With a business Chapter 7 bankruptcy, a court-appointed trustee takes possession of all property and assets, converts them to cash, and distributes the funds to creditors less administrative costs.

Chapter 11—This Bankruptcy Code section details how a corporation or business can file for federal bankruptcy protection and reorganization under its existing management, while it continues to operate as it works out a plan to repay its creditors. Normally a business has three to five years to repay its creditors a minimum of what the creditor would have received if the business liquidated under Chapter 7.

Why Would a Company Choose Chapter 11?
Most companies will file under Chapter 11 rather than Chapter 7 because they can still run their business and control the bankruptcy process. Chapter 11 provides a process for rehabilitating the company's faltering business. Sometimes the company successfully works out a plan to return to profitability; sometimes, in the end, it liquidates. Under a Chapter 11 reorganization, a company usually keeps doing business although is overseen by a trustee.

How Does Chapter 11 Work?
The U.S. Trustee, the bankruptcy arm of the Justice Department, will appoint one or more committees to represent the interests of creditors and stockholders in working with the company to develop a plan of reorganization to get out of debt. The plan must be accepted by the creditors, and confirmed by the court. However, even if creditors or stockholders vote to reject the plan, the court can disregard the vote and still confirm the plan if it finds that the plan treats creditors fairly.

What happens to the company?
Federal bankruptcy laws govern how companies go out of business or recover from crippling debt. A bankrupt company, the "debtor," might use Chapter 11 of the Bankruptcy Code to "reorganize" its business and try to become profitable again. Management continues to run the day-to-day business operations but all significant business decisions must be approved by a bankruptcy court.

Under Chapter 7, the company stops all operations and goes completely out of business. A trustee is appointed to "liquidate" (sell) the company's assets and the money is used to pay off the debt, which may include debts to creditors and investors.

The investors who take the least risk are paid first. For example, secured creditors take less risk because the credit that they extend is usually backed by collateral, such as a mortgage or other assets of the company. They know they will get paid first if the company declares bankruptcy and they have perfected security interests.

Below are some important strategies that could help avoid corporate bankruptcy. Some important strategies to consider include business turnaround, recovery process, and asset financing (asset management). Dunn Consulting can help your company using business turnaround by using crisis management strategies and providing disaster recovery plans.

What is a business turnaround specialist? Turnaround Specialists generally fall into two broad categories: Crisis Managers and Turnaround Managers. A Crisis Manager concentrates on stabilizing a critical situation that is threatening the immediate survival of a business (such as negative cash flow or a calling of the loan by the bank). Simultaneously, he will perform a business viability analysis and begin to prepare either a Recovery or Orderly Liquidation Plan. The Turnaround Manager will guide your company through the recovery and growth process. Many Specialists function in either or both capacities. In either case, they perform their tasks in one of two modes: Interim Manager or Consultant. The Interim Manager will have direct authority and will take the reins of all or a portion of the troubled business. Turnaround Consultants do not take operating roles but instead advise management. Although most business turnaround specialists offer their services in both modes, they tend to concentrate in one or the other.

Dunn Consulting's Business Turnaround Management can help save your company from corporate bankruptcy. Dunn has experience in managing troubled companies in multiple stages of distress and can handle the business issues to help your company restructure or reduce its debt.

Dunn Consulting can help your company under both of these business turnaround categories:

Crisis Management -If your company is in a crisis situation, your company will be stabilized by eliminating the threatening situation that is causing your business problems.

Disaster Recovery Planning- Dunn will also provide a recovery plan for your company by guiding your company until the you can operate back to a normal state.

Evaluation and analysis of corporate assets, including intangible assets, is invaluable in turnaround situations. Fixed assets, including real estate, usually have outdated valuations and new appraisals may bring added value to a company’s balance sheet and net worth, thus the need for a thorough analysis of equipment, inventory and real estate valuation.

When considering asset financing, current assets, such as Accounts Receivable and Inventory, also need analysis and evaluation. Since asset-based lenders usually file a UCC-1 on all assets, receivables are the usually the primary collateral pledged to the loan and approved advance rates determine the amount of money a lender will advance. Dunn Consulting will analyze all factors such as concentration, turn, dissolution along with reviewing the existing terms of your lending agreement(s) to arrive at a recommended solution that meets your needs.

Dunn Consulting Group will recommend solutions that maximize the value of your assets and the cash flow that is generated from those assets.