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Bankruptcy Alternatives for Businesses

On Behalf of | Nov 3, 2022 | BANKRUPTCY LAW - Chapter 11

Chapter 11 bankruptcy in Indiana can be an intimidating process. It involves a large restructuring for the business and it may not result in a viable company once the creditors are satisfied with the arrangement. Restructuring out of court can reach some of the same goals with less cost and a faster process.


Managing a large amount of debt when the macro conditions for a business turn sour can often require some form of restructuring, but it does not necessarily require the red tape and oversight of the court bankruptcy process. There are two main types of out of court restructuring. The first is a creditor composition, where all creditors come to a common agreement to take deferred or reduced payments and forgo court in exchange for a set of agreements about how the company will run itself and regular updates. The second, a workout agreement, is limited to just financial lenders like banks. The objective of both agreements is to get creditors on board, secure some financing, and avoid the time costs as well as the legal exposure from a Chapter 11 process.

Why Restructure

Whether it is an out of court agreement or Chapter 11, companies sometimes get more debt than they can handle. They need a way to pay off their creditors, maintain an inflow of cash to pay operations costs, and rebuild their relationships with their financers. Restructuring makes that possible by altering the terms of their debt.

Out of court restructuring can be faster and easier than Chapter 11, but it does require consensus among the creditors or else the deal will fall apart.