Legal Question in Bankruptcy in New York

Bankruptcy v. Buyout Options

Under what circumstances should a company choose a leveraged buyout instead of Chapter 11 or 7 bankruptcy proceedings?


Asked on 1/28/02, 3:56 pm

2 Answers from Attorneys
Daniel Press Chung & Press, P.C.

Re: Bankruptcy v. Buyout Options

Where the buyout will result in a greater return for creditors and/or shareholders than a Ch. 11 or a liquidation. If your company is facing this prospect, you need to consult with experienced bankruptcy counsel - the sooner the better.

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Answered on 1/28/02, 4:55 pm
John Sawyer Sawyer & Azarcon, P.C.

Re: Bankruptcy v. Buyout Options

Typically, you would opt for bankruptcy only if the company is financially troubled. Chapter 11 if the company wants to reorganize and continue with operations. Chapter 7 if the company cannot successfully reorganize and needs to liquidate.

If the leveraged buyout involves debt reduction, you may very well incur taxable income and additional tax liability that you would not incur from a discharge in bankruptcy.

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Answered on 1/28/02, 4:57 pm


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