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Article 9 of Uniform Commercial Code a cost-efficient tool for struggling businesses

On Behalf of | Apr 29, 2015 | Sales & Dissolutions

Many struggling businesses need the protections offered by Chapter 11 bankruptcy, but Chapter 11 is not the right choice or even feasible for every business with heavy debt. Chapter 11 is highly procedural and costly in terms of money and time, and there may be better options for debtors and creditors alike.

For example, if a business needs to sell assets to resolve debt problems, then Article 9 of the Uniform Commercial Code, which is recognized in each state, may be the most cost-efficient tool for completing the sale. Article 9 can be particularly beneficial because the debtor and the creditor can avoid or reduce costs associated with going to court.

When a debtor defaults, Article 9 allows the debtor to turn over its assets to the secured creditor, who can take possession of the property without going to court. The creditor can then choose to sell the assets in a private or public sale.

Article 9 also allows creditors to use the state courts to repossess assets in the event that a debtor doesn’t want to give up the property. In that sense, an Article 9 sale is like a foreclosure sale.

Whether you’re a creditor or a debtor, it is important to choose the most cost-efficient method of resolving debt issues. A debt relief and bankruptcy attorney can assess your situation and help you explore the full range of options.

If you have questions about negotiating, restructuring or exchanging debt, then Shulman, Hodges & Bastian’s overview of out-of-court solutions may prove helpful.