Name the Business You Are Trying to Save
Start with four separate questions. Must the current legal entity survive? Must customers continue receiving the same service? Must a particular license or contract remain in place? Do the owners expect to retain an economic interest? Those objectives can diverge. An asset buyer can preserve a product and jobs without preserving the seller’s entity or ownership.
Chapter 11 includes reorganization and sale possibilities. Management commonly remains in possession, with duties and oversight; it does not retain unrestricted freedom over the estate. An ABC usually addresses asset realization and distribution rather than a federal plan for the existing company. U.S. Courts: Chapter 11.
Make the operating thesis measurable: recurring customer demand, contribution margin, time to stabilize collections, required staffing, and available financing. A profitable forecast built on unsigned contracts or an uncommitted capital raise should not be presented as a funded rescue. Test a sale and a shutdown alternative alongside the continuation case.
Identify the Power That the Transaction Needs
A business dependent on leases, licenses, or customer agreements needs a contract map. Bankruptcy § 365 offers tools for assumption, assignment, and rejection, but cure, adequate assurance, and exceptions matter. Do not assume bankruptcy transfers every license or eliminates every consent requirement. Ask counsel to identify the rule for each essential agreement. 11 U.S.C. § 365.
If the obstacle is creditor treatment across a capital structure, Chapter 11 plan confirmation provides a different framework from a state assignment. Confirmation without every creditor’s agreement is possible only when the applicable statutory requirements are met. A forecast alone does not establish those requirements. 11 U.S.C. § 1129.
Subchapter V is part of Chapter 11, not a separate state alternative. Its eligibility definitions and confirmation rules require an individual assessment. Check current debt limits, business-activity requirements, exclusions, and filing facts rather than relying on an old dollar threshold in a blog. § 1182 and § 1191.
Cash in a bank account may be cash collateral. A working model must distinguish available cash from funds that cannot be used without consent or court authorization. The proposed budget should identify the legal basis for using each funding source. 11 U.S.C. § 363(c).
Worked Scenario: Six Weeks to a Decision
Consider a fictional service company with a potentially viable customer book. Assume it has $180,000 of cash legally available for the proposed use, expects $240,000 of collections over six weeks, and budgets $390,000 of total operating and process outflows. Management wants a $60,000 minimum cash buffer. All amounts and the buffer are invented planning assumptions; they are not court budgets, market benchmarks, or a reported case.
Bar length shows magnitude; a red bar and minus sign indicate a deficit. Timing within the period still matters. Invented inputs, not a reported case or typical outcome.
The base case ends at $30,000: $180,000 + $240,000 − $390,000. That is $30,000 below the selected buffer. If collections are 25% lower, receipts fall to $180,000 and the ending balance becomes negative $30,000; reaching the same buffer would require $90,000 more cash. Even the positive base-case ending balance does not rule out an earlier weekly shortfall.
For a Chapter 11 proposal, verify the operating assumptions, legal use of cash, financing availability, and a credible exit. For an ABC sale proposal, build a different budget for the preservation period, transaction costs, buyer conditions, and closure obligations. Do not reuse the operating forecast as if it were a sale budget.
Now change one fact: the only credible buyer needs the seller’s main contract, and the counterparty refuses consent. The comparison must address that contract’s transfer law and any bankruptcy tool that could help. Change another fact: the buyer can acquire stand-alone assets immediately with required releases. Continued operations may then be an unnecessary cost. The legal bottleneck and the cash bottleneck must be assessed together.
Add the State-Law Assignment Context
California: the CMBG guide by Jim Baer supplies practitioner context on selecting an assignee and executing an asset sale. Use it to frame questions about buyer readiness, preservation, and stakeholder cooperation; use governing law and transaction documents to determine authority. CMBG California guide.
Florida: statutory court supervision of an ABC changes the procedure and reporting workplan. An assignment should not be described as wholly outside court merely because it avoids a federal bankruptcy filing. Florida Chapter 727.
New York: execution and recording requirements are part of the assignment workstream. The jurisdiction cannot be selected from a comparison table without analyzing the entity and assets. New York DCL § 3.
Compare the California, Florida, and New York guides. For a multistate company, ask which jurisdictions govern property, employees, licenses, and notices even if one court or assignee administers the central process.
Build a Fundable Decision File
- A weekly cash forecast with restricted cash excluded or separately identified.
- A contract schedule naming the obligor, counterparties, defaults, transfer restrictions, and proposed treatment.
- A creditor register separating asserted balances from verified documents and disputed amounts.
- A buyer or financing log that distinguishes signed commitments from nonbinding discussions.
- A route-specific budget, downside case, decision owner, and decision date.
Use the Cash Runway Calculator to test collection timing and the Wind-Down Budget Planner for a separate sale or closure case. Neither tool determines legal eligibility or approves a transaction. The downloadable register helps maintain the evidence behind the assumptions.
At the specialist discussion, ask: What operational change makes continuation viable? Which agreement is essential to the proposed exit? Who funds the downside if the buyer or plan fails? Which owner or guarantor exposures remain separate? A useful recommendation should explain both the route and the facts that would cause it to change.