Question

Discuss the advantages and disadvantages of a formal bankruptcy reorganization versus an informal reorganization?

Answer 1

While not necessarily suited to all situations, information, informal debt restructuring workouts- a method of restructuring the asset and liabilities of debtors in financial difficulty without judicial intervention- can often serve as a useful alternative to formal insolvency proceedings of certain essential pre-condition are in place. They also added a number of important advantage to debtors and creditors alike, which makes them a prudent first course of action to pursue.

Under some legal systeo, the debtor company's management team is routinely displaced when the company enter into formal insolvency proceedings.

Formal insolvency proceedings often have high costs attached, particularly financial costs. But there are also costs in terms of time, energy and reputation.