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A Few Things About Bankruptcy

A Few Things About Bankruptcy. Kevin Crumbo, KraftCPAs PLLC Rhea Bucy, Gullett Sanford, Robinson & Martin PLLC January 19, 2010. What is Bankruptcy?. Business tool to reorganize or liquidate in an orderly manner. Desired results for most cases: Improved cash flow options

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A Few Things About Bankruptcy

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  1. A Few Things About Bankruptcy Kevin Crumbo, KraftCPAs PLLC Rhea Bucy, Gullett Sanford, Robinson & Martin PLLC January 19, 2010

  2. What is Bankruptcy? • Business tool to reorganize or liquidate in an orderly manner. • Desired results for most cases: • Improved cash flow options • Continuity of operations • Forum for business solutions • Avoid some types litigation Difficulty/cost of bankruptcy now driving out-of-court activity for same results.

  3. Reorganization Chapter 11 bankruptcy: • Allows for restructuring or controlled liquidation under court supervision. • Business management sometimes allowed to stay in control. • Generally used as a strategic tool to address problems, become competitive, and emerge as a stronger viable entity.

  4. Reorganization Common supply chain issues include: • Rejections of contracts or “forced” accommodations, such as • Price increases • Volume commitments • Resourcing restrictions • Cost-sharing on materials and labor variances • Assignment of contracts and purchase orders to third parties. • Plant closures & sales, often with little or no notice. • Labor changes.

  5. Getting StartedCommon Supply Chain Relationships That May Be Immediately Impacted By Bankruptcy • Master purchase agreements • Purchase orders • Accounts payable/receivable • Tooling arrangements • Design & engineering for future production • Information technologies • Joint ventures (domestic or foreign) • Shared labor arrangements

  6. Administrative Expenses in Bankruptcy • Higher priority of claim than many other creditors in bankruptcy. • Historically low funding for bankruptcy reorganizations motivates parties to closely monitor and manage administrative claim details. • Debtors & creditors should have a strategy when feasible under the circumstances.

  7. Administrative Expenses §503(b)(9) Any goods received by Debtor in the ordinary course of business 20 days prior to the filing date are administrative claims.

  8. Administrative Expenses §503(b)(9) Goods v. Services? Delivery Date v. Invoice Date?

  9. Administrative Expenses §503(b)(9) Tips to monitor & manage credit… • Twenty day safe zone • Keep it ordinary • Deposit payments before shipping

  10. Questions? Kevin Crumbo KraftCPAs PLLC (615) 364-6327 www.kraftcpas.com Rhea Bucy Gullett Sanford, Robinson & Martin PLLC (615) 244-4994 x260 www.gsrm.com

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