Corporate Bankruptcy 101 & Select Bankruptcy Issues
1. Corporate Bankruptcy 101 & Select Bankruptcy Issues Morris S. Bauer, Esq. Andrew Stein Larry K. Lesnik, Esq. The material provided herein is for informational purposes only and is not intended as legal advice or counsel.
28. Bankruptcy claims are like junk in the attic. Which makes more financial sense – donating what you have to charity for a tax deduction, or trying year after year to sell it for pennies on the dollar at a garage sale?
29. REMEMBER! You may not write off an account automatically just because your customer has entered bankruptcy. For claims that are more than de minimus , the IRS requires objective evidence of worthlessness to support a full or partial write-off. In a bankruptcy, such objective evidence is usually not available early on.
30. IN A BANKRUPTCY CLAIM SALE, THE BUYER AND SELLER BOTH STAND TO WIN THE BUYER gets an opportunity to realize a healthy return on a cash investment. THE SELLER gets instant cash and an accelerated tax benefit that the IRS is not likely to challenge.
32. $500,000 claim 14% cost of capital 40% effective tax rate No objective evidence of worthlessness until the final year of the bankruptcy ASSUMPTIONS
33. Sell for 2% in 2009? $206,000 Hold for 20% recovery in 2011? $200,000 Sell for 20% in 2009? $260,000 Hold for 60% recovery in 2012? $256,000 Sell for 1% in 2009? $203,000 Hold for 10% recovery in 2010? $202,000
34. Sell for 2% in 2009? $206,000 Hold for 20% recovery in 2011? $200,000 Sell for 20% in 2009? $260,000 Hold for 60% recovery in 2012? $256,000 Sell for 1% in 2009? $203,000 Hold for 10% recovery in 2010? $202,000
35. Sell for 2% in 2009? $206,000 Hold for 20% recovery in 2011? $200,000 Sell for 20% in 2009? $260,000 Hold for 60% recovery in 2012? $256,000 Sell for 1% in 2009? $203,000 Hold for 10% recovery in 2010? $202,000
36. Sell for 2% in 2009? $206,000 Hold for 20% recovery in 2011? $200,000 Sell for 20% in 2009? $260,000 Hold for 60% recovery in 2012? $256,000 Sell for 1% in 2009? $203,000 Hold for 10% recovery in 2010? $202,000
37. SELLER Assumes risk that claim is valid BUYER Assumes risk of percentage payout CONTRACT
66. Ilana Volkov, Esq. Melissa A. Peña, Esq. James N. Lawlor, Esq. Joseph Aronds, Esq. Corporate Bankruptcy 101 & Select Bankruptcy Issues The material provided herein is for informational purposes only and is not intended as legal advice or counsel.
67. Key Considerations For Landlords When Faced With Commercial Tenant’s Bankruptcy Presentation to New Jersey Corporate Counsel Association March 24, 2009 Ilana Volkov, Esq. [email_address] (201) 525-6269
116. Materials prepared by James N. Lawlor Partner, Wollmuth Maher & Deutsch One Gateway Center, Ninth Floor Newark, NJ 07102 - and - 500 Fifth Avenue New York, NY 10110 Email: jlawlor@wmd-law.com Phone: 973-733-9200 www.wmd-law.com All Rights Reserved PRE- AND POST- BANKRUPTCY RIGHTS OF CREDITORS