Alternatives to Bankruptcy — Part 2 Short Artwork

Corporate Bankruptcy A to Z

The corporate bankruptcy process is explained by seasoned bankruptcy attorneys, consultants, judges and companies who have filed for bankruptcy. It begins with what is bankruptcy, to who should file, how to find the best attorney, what forms to file, what happens to the company after the filing, the plan to exit and how it all works.

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Corporate Bankruptcy A to Z

Alternatives to Bankruptcy — Part 2 Short

May 22, 2026 • Neil Goldstein

0:00 | 15:16

Topics

Other options to Chapter 11
Out-of-court restructuring
ABCs — Assignment for Benefit of Creditors
Receiverships
Article 9 sales

Guest: Stephen B. Ravin — Saul Ewing LLP

This is an abridged version of the original episode. Feel free to go back and listen to the full version in our show feed.

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SPEAKER_01 0:01

You are listening to Corporate Bankruptcy A to Z, a podcast that gives you the ins and outs of corporate bankruptcy. This is an abbreviated release of episode 3 Part 2, where we will cover out-of-court restructuring options, including assignments for the benefit of creditors, receiverships, Article 9 sales, and how to determine which path best fits a company's situation. If you are new to the show or want to hear the full conversation about this topic and more, we invite you to check out our full bankruptcy series found below in the show feed. There you will find an unedited version of each episode where we dig deeper and answer more questions. Corporate Bankruptcy A to Z is hosted by Neil Goldstein, a chief restructuring officer with over 30 years experience. He's joined by co-host and legal expert Steve Raven of SALUI, a bankruptcy attorney with over 40 years in the field. If you are dealing with a situation now and need guidance, you can reach out to them directly. Call Neil at 940-808-9451 and Steve at 973-286-6713.

SPEAKER_00 1:11

For this episode, we have a special guest. My co-host, the renowned Steve Raven. Steve, welcome back. Steve, in this podcast, we have mostly focused on a company filing for a chapter 7 or 11 or an out-of-court restructuring. But are there other options?

SPEAKER_02 1:32

There are other options, and in fact, over the last let's call it 10 years, some of those options, or otherwise known as alternatives to bankruptcy, have been uh prevalent.

SPEAKER_00 1:48

Of the alternatives, is there a best choice?

SPEAKER_02 1:52

Well, there are three choices, or maybe four. And without going into them at this moment, the best choice is really the one that fits the specific facts and circumstances best.

SPEAKER_00 2:08

Can you explain what an out-of-court settlement is?

SPEAKER_02 2:13

Well, an out-of-court settlement is exactly what it sounds like. It's a settlement with creditors that does not involve the court. Uh it does not involve a bankruptcy court, and it does not involve a state court like an ABC. The benefit of an out-of-court settlement is that it's probably the least expensive alternative of all of them because there's no court involvement. It's just a different level of complexity. And you can do things in an out-of-court that you can't really do in a court-administered process. For example, if there is a critical supplier without which this business cannot continue, and the critical supplier says, I want $50,000 tomorrow, you can do that in an out-of-court because there's no court. You can't do it as easily in an ABC or a bankruptcy because that kind of transaction would require court approval, which means that you have to prepare documents and note and serve those documents on various parties and schedule a hearing and ultimately have a hearing. So all of those last four requirements add to the complexity, the costs, the time. So that's why an out-of-court settlement is cheaper, easier, and usually quicker. And creditors appreciate it because they in a bankruptcy the creditors' debts are held up who knows how long, and typically the creditors will think that they're never going to get anything, as opposed to an out-of-court where you can make a deal to pay immediately on a discount or whatever the arrangements might be.

SPEAKER_00 4:14

Of all the options we discussed, this sounds like the least intrusive. Is that also your opinion?

SPEAKER_02 4:21

Yes, it's least intrusive because there's no public filings, for one thing, and there's just a lot less information that is released because it's not required.

SPEAKER_00 4:36

Once a company decides on a choice, can they rescind the decision and make a more appropriate choice?

SPEAKER_02 4:45

They can. If, for example, and I guess the most common of this process that you're talking about is if a company is attempting to do an out-of-court settlement, but it's not working out, or the revenue that's coming in isn't is not enough to back up the payments that were promised in this out-of-court settlement, or creditors are beginning to get a little more aggressive in filing lawsuits, the company can always file a bankruptcy. So it's going from an out-of-court settlement to a bankruptcy. It's more difficult to uh go the other way, like file a bankruptcy and then seek to dismiss the bankruptcy and go into an out-of-court settlement. You have a high burden to convince the bankruptcy court that the company's not going to be right back in bankruptcy. So you have to demonstrate to the court, for example, that you have obtained the funds to satisfy the debts of the creditors. On that basis, you can seek to dismiss a bankruptcy.

SPEAKER_00 6:02

Can we begin with the assignment for the benefit of creditors?

SPEAKER_02 6:07

Yes, an assignment for the benefit of creditors is very similar to a Chapter 7 bankruptcy, wherein typically the business of the troubled company terminates, and the assets are assigned by deed to an assinee who receives the assets, and it's for the benefit of the creditors. The assinee is a fiduciary for the creditors, just like a bankruptcy trustee. He or she liquidates the assets and accumulates the proceeds from the liquidation and ultimately makes a distribution to the creditors. The different states have different assignment for the benefit of creditors' statutes. And by the way, we call them ABCs.

SPEAKER_00 7:10

Does the company operate during an ABC or does all operations cease?

SPEAKER_02 7:17

In some states yes, and in most states no.

SPEAKER_00 7:21

What is the major benefit derived from an assignment? And can you give a case study to illustrate that benefit?

SPEAKER_02 7:29

I can. The major benefit well, there's more than one benefit. The primary benefit is that an ABC is a lot cheaper from the perspective of professional fees, etc., than something like a chapter eleven. Another benefit is that a proceeding in the state court at like an ABC is less complex and easier to get things accomplished than a bankruptcy. In a bankruptcy, you have what's called the Office of the United States Trustee, which is uh a branch of the Department of Justice which oversees all bankruptcies. And they are another party at the table that has to be dealt with in a bankruptcy.

SPEAKER_00 8:24

Let's move on to a receivership. A receivership sounds like someone else will be taking over the company. What is a receivership?

SPEAKER_02 8:34

A receivership is where you have a typically a troubled company, and a party, usually a creditor and usually a judgment creditor, will apply to the court, uh, asking the court to appoint a receiver or a third party to take control of the business on the basis that since the company itself is not paying its debts and has gotten to the point of this creditor having a judgment that the company is not fit to run their own company. So that creditor applies to the court for the appointment of a receiver. That creditor will recommend a particular person that they are familiar with, and it's up to the court to either approve that person or put in someone else who the court, and when I say the court, I mean the judge, who the judge thinks would be either more appropriate or for one reason or another, uh wants that a different party to be the receiver. The receiver then goes into control of the business, retains attorneys and accountants, if necessary, and either runs the business or liquidates the business to satisfy their debt. And all of this is uh administered by the court.

SPEAKER_00 10:08

How does a receivership differ from other categories of restructuring?

SPEAKER_02 10:15

Well, one primary way is that in an ABC, the troubled company chooses the party who will be the assinee. So they choose the fiduciary. Um in a receivership, the troubled company is out of control. They don't have that ability to choose the party. So uh it's a basically friend or foe, a foe in the case of a receivership, or a friend in the case of an ABC. That's a major difference.

SPEAKER_00 10:53

An Article 9 sale was mentioned as a possibility. Can you describe what an Article 9 sale is and how it works?

SPEAKER_02 11:02

An Article 9 sale is sometimes referred to as a friendly foreclosure. And what happens in an Article 9 sale is you have a lender who, let's just say, is owed $2 million. Uh, you have a company which has defaulted on that loan, and you have a buyer who wants to buy the assets. And this is all set up sort of in advance, where through the paperwork, under Article 9 of the Uniform Commercial Code, the lender will foreclose on the assets and in the same paperwork, in essence, sell those assets to the third party. It occurs where there is no equity in the assets, or in this case, the assets are worth less than the debt, so other creditors are not being harmed, they're not going to get anything anyway. And this is a way of preserving as much value for the secured creditor as possible. There's no cessation of operations. The current company is here one day and gone the next without an interruption, and uh that's that's how an article nine sale works. I was involved in an article nine sale very recently, within the last uh year. This was an article nine sale involving a company in Atlanta which uh manufactured displays. And over the years, over the last several years, it lost a lot of customers. They were in default with their lender, and there was a buyer, so they did an Article 9 sale to that buyer. I represented, and in fact, I still represent a creditor of the entity, an unsecured creditor, but from the perspective of the troubled company and the buyer and the lender, it was a very effective process to maximize the value for those three constituents.

SPEAKER_01 13:21

Do you have a question about bankruptcy? Why not ask the experts? Emails for Neil and Steve can be found in the show notes below, and remember, the first call is always free. Call Neil at 940-808-9451 and Steve at 973-286-6713. You can also find more resources on our websites. Go to corporatebankruptcy a z dot com or elementarybusiness.com. You can also find links to those in the show notes down below. Corporate Bankruptcy A to Z podcast and YouTube channel are produced by me, Sir Isaac Smith. Be sure you subscribe and share the episode, and we will see you next time.