I’m Eric Lanigan with Lanigan and Lanigan
attorneys in Winter Park. I’m going to talk for a few minutes about some fundamentals
of bankruptcy law specifically as it relates to Chapter 11 bankruptcy law. Another thing that occurs early on in a Chapter
11 bankruptcy is what we generically refer to as First Day Orders. And these are things requests for orders that
are submitted almost simultaneously with the filing of a bankruptcy. And they deal generally
they deal with just an order allowing certain day to day mundane things to continue. Which
in the normal course of business you wouldn’t need an order to do it. But obviously now
you’re under the supervision of the bankruptcy court so you need to get an order entered. For instance you need an order to hire the
debtor’s attorney to represent the entity in the bankruptcy proceedings and also as
to any creditor’s claims or creditor’s issues. An order to pay the employees their regular
wages. An order to set that sets forth the terms of the use of business revenues which
is it maybe very generic in essentially just says that the business revenues can be used
as commonly in the ordinary course of business. Buy inventory, make repairs do things like
that. So you get an general order entered to do things like that. So those are some of the basic things that
go on early on in a Chapter 11. To me the most important things are that the debtor
is allowed under the concept of Debtor Under Possession to continue to operate the business.
And as long as they do so in an honest and reasonable manner, they will continue to operate
the business throughout the bankruptcy proceedings. And of course the other thing is the automatic
freeze which stops aggressive creditors from basically wrecking the business. We’ve had situations where in clothing stores
where there was a creditor literally within days of backing up a truck and hauling away
seizing and hauling away all of the inventory. Well the business would be instantly over.
And not only would they then not have anything to sell but everybody on the street would
see this going on and obviously that’s the end of business. So that I think is one of the most important
things. But another very important principle is don’t wait too long and we’ve had this
very recently in a case where it’s an individual Chapter 11 the person owns multiple multiple
properties spread out over several states as far North as New Hampshire and into Florida. They became embroiled in incredibly complicated
litigation up north and the judge was really well let’s put it kindly, was ruling against
them on virtually everything and a layman might use terms like getting railroaded and
things like that. The problem we had is that so many of these
issues had already been brought before this state court and ruled upon by the state court
up north. And one of the first things that we heard
when we went into bankruptcy court was the bankruptcy judge looking at me and saying,
“Mr. Lanigan, we are not going to re-litigate any of these issues that have been tried up
in Massachusetts, so whatever’s happened there you’re stuck with it.” So that really put us in a straight jacket
that almost doomed the Chapter 11 and you hate to say it but the bottom line was if
you’d only been in here a year ago when all of this litigation started going bad and
realize that it had to be cut off and get this into a different court. But because this was too late, we’re stuck
in a straight jacket and the case was almost completely doomed from the beginning. So don’t wait. If the business is going
South, get into a lawyer’s office who knows something about Chapter 11. Discuss your situation.
Determine whether or not it’s time to file. Or if not what can be done to avoid or to
deal with a creditor and possibly even to avoid having to file a Chapter 11. Again I’m Eric Lanigan, Lanigan and Lanigan
attorneys in Winter Park Florida.