ALERT: WITHSTANDING THE WAVE OF COVID-19 BANKRUPTCIES
Both common sense and recent press tell us all that a wave of bankruptcies is coming in connection with economic effects of the COVID-19 pandemic. Managing your position in these bankruptcies will be extremely important to your success in these challenging times. Bankruptcies present a wide range of potential approaches and responses for the creditor. Some bankruptcies may require a less involved approach – timely filing a proof of claim and monitoring. Other bankruptcies may require more involvement – such as participating in first day motions and other early matters in order to be well positioned on budgeting, cash collateral, and assumption/rejection/cure issues. Early attention and involvement of counsel, as soon as the creditor becomes aware of the bankruptcy (even pre-petition), maximizes the options available to the creditor and the ability to protect the creditor. Creditors that wait until the eve of proof of claim deadline (or worse yet: after the proof of claim deadline and/or when a preference action is brought against the creditor later in the proceedings) may find themselves with limited options.
Prepackaged bankruptcies that seek confirmation before the schedules are even due to be filed are a recent trend in some Chapter 11 filings. These quick Chapter 11 filings can be a benefit for everyone involved. They also require early attention to make sure creditors’ positions are accurately stated and properly protected.
During these challenging times, many topics and people are competing for management’s attention. Good management will delegate quickly and intelligently. When the bankruptcy notices hit, good management will involve counsel quickly to ensure maximum protection.