New Jersey Restaurant Chapter 11 Bankruptcy Reorganization

Middlebrooks Shapiro, P.C. confirmed a Chapter 11 bankruptcy plan of reorganization for a New Jersey restaurant in the U.S. Bankruptcy Court for the District of New Jersey. Our client was on the brink of closure due to merchant cash advance (MCA) liens on its cash collateral (its receivables i.e. cash flow). It also required assistance to address outstanding tax debts and various other general unsecured debts. At the start of the Chapter 11 case, our client used an emergency motion to approve interim use of cash collateral to stop the various levies on its receivables, which was granted, and which freed up our client’s cash flow so that it could begin to operate again. A final order on use of cash collateral was later entered, permitting our client to continue to operate during the course of the bankruptcy using that levied cash flow to operate post-petition. During the Chapter 11 case, our client also moved for Court approval of its entry into a new, extended lease with its landlord of the property where it operates its business. The Court approved that motion, and our client was authorized to enter into this new lease, which ensured its continued operation at its existing location, and prevented potential loss of its business and/or significant expense required to locate a new property. During the confirmation process, the Court approved the adequacy of our client’s Disclosure Statement and, after our client solicited votes for its Plan, it obtained ballots from two (2) impaired classes accepting the Plan. After working with counsel to a taxing authority to fine-tune the language in the proposed Confirmation Order, and with the consent of the Office of the United States Trustee, the Court entered the Confirmation Order. Under the confirmed Plan, our client will make interim distributions on all allowed claims, which are all to receive 100% distributions over the term of the Plan, including to taxing authorities on both pre- and post-petition priority claims. Our client is now emerging from Chapter 11 with a new, extended lease in place, and with the freedom and confidence to operate its business without risk to its cash flow. The net result is 100% distributions to all creditors with allowed claims, which is a win-win result for both our client and its creditors.

Small Business Owner Chapter 11 Bankruptcy Reorganization

Middlebrooks Shapiro, P.C. confirmed a Chapter 11 bankruptcy plan of reorganization for a New Jersey small business owner in the U.S. Bankruptcy Court for the District of New Jersey. Our client was struggling to resolve a $4,200,000 default judgment against both him individually and his single member LLC. During the Chapter 11 case, our client used an adversary proceeding and motion practice to substantially reduce the $4,200,000 default judgment down to $148,000. To do this, we bifurcated the judgment into: 1) a secured portion totaling approximately $148,000 to be paid at 0.00% interest over five (5) years (and avoided the default judgment to the extent it impaired his homestead exemption); and 2) a general unsecured portion of $0.00. The net result is an approximately $4,000,000 reduction of the state court default judgment, which was not obtained by a decision on the merits against our client, and the vast majority of which was interest. To protect our client’s post-petition income during his reorganization, at the start of the bankruptcy case, we prevented levy and sale of our client’s LLC’s assets during the course of the Chapter 11 by obtaining entry of an order granting our client’s motion to extend the automatic stay protections to his LLC. Now, with the confirmation order in place, the stay will remain in place through completion of the plan, which will span the next 5 years. This will allow our client to confidently operate his closely held company and fund his plan of reorganization. As a result of paying $0.00 on the general unsecured portion of the default judgment, our client could propose 100% distributions to all other general unsecured creditors, which is a win-win for both our client and his legitimate general unsecured creditors. Our client is now emerging from Chapter 11 with clarity around the state of his assets, and debts, and can confidently continue to operate his small business.

Digital Media Company Chapter 11 Bankruptcy Reorganization

Middlebrooks Shapiro, P.C. confirmed a Chapter 11 bankruptcy plan of reorganization for a New Jersey digital media company in the U.S. Bankruptcy Court for the District of New Jersey. Our client, a digital media company focused on distribution of video and other content through websites and social media platforms, was mired in costly arbitration and federal litigation in the Ninth Circuit related to corporate authority, control, and ownership. During the Chapter 11 case, our client used the Bankruptcy Code and Rules to substantially resolve the issues underlying that arbitration and litigation, and to set forth a plan of reorganization. The Bankruptcy Court entered an Order confirming its First Modified Plan of Reorganization. That Order expressly resolved a variety of issues. The entity is now emerging from Chapter 11 with clarity around the state of its assets and claims, debts and obligations, and the rights and responsibilities of its equity holder.

Health Care Business Chapter 11 Bankruptcy Reorganization

Middlebrooks Shapiro, P.C. confirmed a Chapter 11 bankruptcy plan of reorganization for a New Jersey health care business in the U.S. Bankruptcy Court for the District of New Jersey. Our client had over $1,150,000 in tax and other claims secured against its property, including its cash and receivables. Pre-petition, the business’ cash flow was heavily levied, preventing it from operating. Post-petition, the business commenced operations, and generated substantial income to support both its operations and its plan of reorganization. Under the plan, allowed claims will be paid in full over a five (5) year period, while our client will assume its receivables, its unexpired real property lease, and various executory contracts. Two (2) of the largest impaired classes voted in favor of the plan, and the Bankruptcy Court confirmed that plan under Section 1129(a) of the Bankruptcy Code. During the case, we worked with the IRS’ counsel to modify its tax claim from over $2,500,000 down to $0.00. We also worked with the State of NJ’s counsel to obtain entry of a consent order regarding the plan’s treatment of its tax claims. We negotiated another consent order with counsel to certain pre-petition litigation claimants to modify the automatic stay to permit their claims to proceed solely against certain insurance policies. Our client is now emerging from Chapter 11 with clarity around the state of its assets, and debts, and can confidently continue to operate its health care practice unhindered by debt issues.