Using a Mediator in a Bankruptcy Case

Written by Wall Street News on February 6, 2019. Posted in Bankruptcy law, Employment law, Qui tam actions

Bankruptcy is when a person or a company formally recognizes that debts cannot be paid off under current circumstances, so when a wealth individual or a company declares itself bankrupt, it will need legal representation, a mediator, and a court to help settle this matter with its creditors. When carrying out bankruptcy filings, a debtor company may need a mediator to ensure that the case is a fair one, and a mediator can be hired during the lengthy bankruptcy process by the court or the debtor. Arbitration may also be useful here, to help avoid commercial disputes during the case’s progression. How often do companies file for what is known as chapter 11 bankruptcy, and what other court cases might there be?

Chapter 11 Bankruptcy

It is often smaller businesses that declare chapter 11 bankruptcy, and it has been found that about 90% of those who declare chapter 11 bankruptcy are businesses with under $10 million in assets or liabilities, under $10 million in annual revenues, and 50 or fewer employees. When such a company has declared itself bankrupt and gets a lawyer and a mediator for the case, there are some steps to follow in bankruptcy court.

First of all, if the debtor has been acting honestly and in good faith until this point, the creditors may allow the debtor company to be considered DIP, or “debtor in possession.” This means that the debtor company retains control of its assets and remains open for operations, but there are some conditions attached to this. For one thing, the debtor may not, without permission, take on new debts, hire a lawyer, or buy or sell property outside of what it normally buys or sells for business operations. A debtor company that violates these terms or otherwise acts dishonestly may have its DIP status revoked.

As chapter 11 bankruptcy continues, the debtor company will be tasked with creating a reorganization plan, which is a plan for downsizing or altering the business and its finances so that the debts can be paid off partly or in full. The debtor may have several months to work on this, and when the plan is complete, it is presented to the judge and creditors. If accepted, the plan will be set into motion, but in rare cases, the plan will be rejected and the creditors will offer their own. The end plan may shrink the debtor company or liquidate the entire thing so that the debts can be paid. In some cases, only part of the debt will be paid off even if the debtor is fully liquidated, and creditors will have to be satisfied with a partial payment.

Other Court

Sometimes, a company may need a lawyer or a mediator for other court cases, such as workers’ compensation cases or if the company is accused of health hazards in the workplace. In some cases, a company may need a mediator in court if it is accused of environmental damage, and this has been known to happen. Sometimes, the air conditioning systems in an office building are dirty and can contain a lot of harmful bacteria, molds, or even fungi or viruses, and this can negatively impact the health of everyone in the building. This can set off asthma or allergies and drive up the number of sick days requested, and if this happens often enough on the premises, the company may find itself in court or at least litigation over this, and it may need a mediator to ensure that all parties are being treated fairly so that a sensible conclusion can be reached for the case. The same may be done if a company is accused of causing environmental damage, such as exceeding regulations for air pollution (such as power plants or car factories), or if a company discharges sewage or industrial chemicals into protected natural environments. This may be especially grave if the pollution is going into bodies of water that are used for human consumption. In fact, it is fairly common for companies and factories to dump harmful chemicals, metals, and more into aquifers and water tables that are drawn upon for water processing plants, and this can be a serious public health hazard.

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