Guarantees & Creditor Meetings - Short

Topics

• Creditors' meeting & what it means
• Personal guarantees — options & rights
• Hiring & firing during bankruptcy

Guest: Jason Manfrey — Fox Rothschild 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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Transcript

SPEAKER_02 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 9, where we will cover what happens after filing, including creditor meetings, forming committees, litigation risks, and how personal guarantees are handled during the process. 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 Stall Ewing, 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 1:10

We'd like to welcome Jason Manfrey of Fox Rothschild to the podcast. The initial debtor interview and 341 creditors meeting has taken place. What types of issues might you learn from these meetings?

SPEAKER_03 1:26

Well, you know, the 341 is useful and it's a place to lay out your game plan of the case to other creditors, tell everyone a little bit about what's going on, and to take questions. During the 341 meeting, we may learn what creditors are thinking about litigation, what their expectations are from the case, and also which creditors really want to maintain a relationship going forward.

SPEAKER_00 1:52

Can you give an example of what you might say or what might happen at a creditors meeting?

SPEAKER_03 2:00

Typically, the debtor representative, along with us, the attorneys, we pretty much sit at the front and there's a bunch of chairs, and uh a whole bunch of creditors usually fill the room. And some also post-committee counsel will be there. Because you know, I think that's an important thing not to forget, is that some of these creditors there, for the most part, are the larger ones that will be sitting on the committee, they're going to be actually involved with the case. So typically, during those, after we make our presentation about the company and what we see are the high-level issues, we'll feel questions from attorneys who are actually somewhat positioning themselves to become a counsel for the uh creditors committee.

SPEAKER_01 2:41

As a matter of fact, oftentimes in these meetings, the U.S. trustee will excuse the debtor and the debtor's professionals and say you guys can leave. Then they'll get down to business and either form a committee or talk about different issues that they don't need the debtor for.

SPEAKER_00 3:01

On previous episodes, we learned that personal guarantees are not stayed during a bankruptcy. What advice do you give your clients who have personal guarantees?

SPEAKER_03 3:14

If they are in the personal guarantee on the of the debtor's obligations, I'm gonna let them know, right, you're right. It's it's not stayed from the outset. One of the avenues you can go is to seek to extend the automatic stay from the debtor, um, the personal guarantor. And that'll work if the personal guarantor is in management or on the executive side of the business. Some courts will extend that relief. It's a very fact-specific approach, because with the idea being this person needs to be focused on what we're doing here, but it it's definitely a little bit of an uphill battle. So that you know, all things are off the table. Now, one thing you can do, you know, is we advise, is try to seek some type of a release or stay in the as part of the plan. Typically that is met with resistance, but you know, those are generally the the two options you have.

SPEAKER_00 4:15

Let's get to employees. Can the company hire more employees during the bankruptcy period?

SPEAKER_03 4:22

Once again, you know, if it's in the ordinary course, the yeah, the company hire uh employees. Um, you know, I think it's important to keep in mind that these uh employees and salaries will be reflected in that monthly operating report going forward.

SPEAKER_00 4:39

Is management restricted in any way from terminating employees or contracts?

SPEAKER_03 4:45

You know, management can terminate, is not restricted in any way from terminating employees. However, you know, if there's contracts, then you get into the issue of whether, you know, we have to at least file some type of rejection notice or you know, depending upon the procedures that you have of those actual contracts with the employees.

SPEAKER_02 5:04

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 corporate bankruptcy 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.