Workouts
Workouts
Workouts are an alternative to bankruptcy where a debtor and creditors reach an agreement regarding the payment of the debts. Workouts are usually simpler than a bankruptcy proceeding and can often be completed more quickly. Because workouts are voluntary agreements, they can offer protections broader in scope than bankruptcy, but they have limitations. Since all parties have to agree, any creditor can disrupt the proceeding by choosing either not to participate or sign the agreement. By contrast, in a bankruptcy proceeding the court can bind all creditors to an agreement.
When considering a workout, timing is critical. Although a debtor can attempt to negotiate with creditors at any time, choosing to do so before defaults occur provides a debtor with a stronger negotiating position which typically results in a better outcome. It is in a debtor’s best interests to discuss the possibility of a workout with an attorney at the earliest possible opportunity.
If you would like to discuss a potential workout with Matt Grimshaw, book a consultation call with him today.
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Frequently Asked Questions
If you have found yourself in a situation where a workout or bankruptcy looks like a practical solution for your organization,
please read our frequently asked questions to learn more about what to do next.
What is an out of court workout?
An out-of-court workout provides an alternative solution to a Chapter 11 or Chapter 7 bankruptcy filing. It allows an organization to restructure its debts without involving the courts by negotiating with creditors.
What are the different types of workouts available to me?
In general, there are two types of workouts — compositions and extensions. A composition is an agreement between a debtor and one or more creditors wherein the creditors agree to a partial payment in settlement of their claims. An extension involves an agreement between the debtor and one or more creditors wherein the creditors agree to extend the amount of time the debtor has to pay its obligations.
Will my creditor agree to a workout?
Debtor and creditor workouts are voluntary agreements, which means that your creditors don’t have to accept the terms you offer. However, if they refuse the offer, they forfeit their ability to claim the proposed repayment later. It is also possible for some, but not all, of your creditors to accept the terms you offer.
Which option is best for my organization?
An out-of-court workout could work for your organization if:
• It has relatively few creditors with which to negotiate
• Its corporate organization and debt structuring are relatively straightforward
• There have been good relations with these creditors in the past
Workouts can be complex processes that require difficult negotiations, and timing is crucial. Ensure you are negotiating from the best position by starting the process quickly.
Matt Grimshaw is committed to delivering the best outcomes for his clients and their business situations.
Book a consultation today to find the best solution for your organization.