Recommend the other types of bankruptcy

Assignment Help Operation Management

Reference no: EM132111692

ALL SHE NEEDS IS A LITTLE BREATHING ROOM

When Debbie Dawson started her business 12 months ago, she estimated that it would be profitable within 8 months. That is not what happened. During the first 6 months, she lost $18,000; during the next 6 months, she lost an additional $14,000. Debbie believes that the business is going to get better during the next 6 months and that she will be able to break even by the end of the second year. However, her creditors are not sure. Debbie’s business owes the two largest creditors a total of $48,000. The others are owed a total of $38,000.

Debbie believes that, if she can postpone paying her creditors for a period of one year, her company will be strong enough to pay off all of its debts. On the other hand, if she has to pay the creditors now, she will be too weak financially to continue and will have to declare bankruptcy. “I really think it’s in everyone’s best interest to give me 12 months of breathing room,” she explained to her husband. “If they will do this, everyone is going to come out on top. Otherwise, we are all going to take a financial bath.”

Debbie has considered broaching the subject with her two major creditors. However, she is not sure whether this suggestion would be accepted or would be used as a basis for their bringing legal action against her. “If they think I am trying to stall them, they just might demand repayment immediately and force me into bankruptcy,” she explained to a close friend. “Of course, if they see things my way, that’s a different story. In any event, I’m reluctant to pursue this line of action without talking to my attorney.”

Debbie hopes she and her attorney, Juan, can work out a plan of action that will prevent her having to declare bankruptcy and liquidate the firm. During her phone call to set up a meeting with Juan, she comments, “If everyone remains calm and looks the situation over very carefully, I think they’ll agree that my suggestion is a good one. After all, I’m not asking them to put any more money in the business, so the most they can lose is what they are owed currently. On the other hand, if they force my hand, they’ll probably be lucky to get 40 cents on the dollar. If they wait, they could end up with all of their money. All I’m asking for is a little breathing room.” Juan suggests that they meet later in the week to talk about it. “I’m sure we can think of something,” he tells her.

QUESTIONS

1. What type of bankruptcy agreement would you recommend? Why?

2. Why would you not recommend the other types of bankruptcy? Be complete in your answer.

3. When selling the creditors on your recommendation, what argument(s) would you use?

Reference no: EM132111692

Questions Cloud

Growing trade deficit reflects a number of factors : The relative bargaining power of suppliers is high when. The United States' growing trade deficit reflects a number of factors which exclude.

Advise julius of any possible defences : Advise Julius of any possible defences that the council may use - In your answer, you must consider and apply any relevant statutory provisions and decisions

The relative bargaining power of suppliers is high when : The relative bargaining power of suppliers is high when: The United States' growing trade deficit reflects a number of factors which exclude:

About why hotel chains have very little property ownership : In a few paragraphs, talk about why hotel chains have very little property ownership.

Recommend the other types of bankruptcy : What type of bankruptcy agreement would you recommend? Why? Why would you not recommend the other types of bankruptcy?

Purchase of new human resource information system : Your organization is contemplating the purchase of a new human resource information system and has tasked you with formulating a proposal.

What different skills are required for each : What different skills are required for each? What reactions can one expect from using his different skills?

Explain the differing approaches of common law : Explain the differing approaches of common law and equity to the concept of "estoppel by conduct",discuss the elements of this unifying principle

What is the firms economic profit : Which value is typically larger, accounting profits or economic profits? When are accounting profits equal to economic profits?

User Account

All Pages