Best Restructuring & Insolvency Lawyers in Delaware

About Restructuring & Insolvency Law in Delaware, United States

Delaware is a premier jurisdiction in the United States for companies facing financial distress, restructuring, or insolvency. The state is home to the Delaware Court of Chancery and the United States Bankruptcy Court for the District of Delaware. Delaware law is renowned for its predictability, transparency, and efficiency in handling business reorganizations and bankruptcy proceedings. Whether involving Chapter 11 corporate restructurings or liquidations under Chapter 7, Delaware has established itself as a cornerstone for resolving complex business insolvency matters.

Why You May Need a Lawyer

Legal counsel is crucial when dealing with restructuring and insolvency. Common scenarios where a lawyer's help may be needed include:

• Your business is unable to meet its financial obligations or is on the verge of defaulting on debts.
• You are a creditor trying to recover money owed from a company that is insolvent or in bankruptcy.
• You are considering filing for bankruptcy protection under Chapter 7, Chapter 11, or Chapter 13.
• Your company is restructuring its operations, debts, or obligations to avoid insolvency.
• You want to understand your rights and obligations under Delaware's bankruptcy laws as a director or officer.
• You are facing legal action as a result of insolvency, including lawsuits, foreclosure, or asset seizures.
• You need assistance negotiating with creditors or securing new financing during restructuring.

Local Laws Overview

Delaware law provides a comprehensive framework for addressing restructuring and insolvency. Key aspects include:

• Bankruptcy Courts: Most corporate bankruptcy cases filed in the U.S. are managed in the United States Bankruptcy Court for the District of Delaware, due to many corporations being incorporated in Delaware.
• Chapter 11 Reorganizations: Delaware is a leading jurisdiction for Chapter 11 cases, allowing companies to restructure debts while remaining in control of operations as a “debtor in possession.”
• Chapter 7 Liquidations: Under Chapter 7, a trustee is appointed to liquidate company assets and distribute proceeds to creditors. Delaware courts efficiently manage these cases.
• Automatic Stay: Filing bankruptcy in Delaware triggers an automatic stay, which temporarily halts most collection actions against the debtor or the debtor's property.
• Preference and Fraudulent Transfers: Delaware courts regularly handle cases involving alleged preferential or fraudulent transfers prior to bankruptcy.
• Director and Officer Liability: Delaware law outlines directors’ and officers’ duties to creditors during insolvency, providing clear legal standards and protections.
• State Law Assignments for Benefit of Creditors (ABC): Alternative to federal bankruptcy, Delaware law enables companies to assign assets to a trustee for the benefit of creditors through court-approved processes.

Frequently Asked Questions

What is the difference between restructuring and insolvency?

Restructuring focuses on reorganizing a company’s finances and operations to avoid insolvency. Insolvency means a company is unable to pay its debts as they come due, often leading to bankruptcy or liquidation.

Why do so many bankruptcy cases get filed in Delaware?

Many companies incorporate in Delaware because of its favorable corporate statutes and experienced courts. As a result, bankruptcy cases involving these entities are often filed in Delaware’s federal bankruptcy court.

What is Chapter 11 bankruptcy?

Chapter 11 bankruptcy allows businesses to restructure their debts while continuing to operate. It offers protections from creditors and an opportunity to develop a plan to repay or reorganize obligations.

What happens to company management during Chapter 11?

Under Chapter 11, the existing management usually remains in control as a “debtor in possession” unless the court appoints a trustee for cause, such as mismanagement or fraud.

How are creditors paid during bankruptcy?

Priority is given to certain creditors under the U.S. Bankruptcy Code. Secured creditors are paid first from collateral, followed by unsecured creditors, and finally shareholders if any funds remain.

What is an automatic stay?

The automatic stay is a provision that immediately stops most collection efforts once bankruptcy is filed. This protection allows the company time to reorganize without creditor pressure.

What is an Assignment for the Benefit of Creditors (ABC)?

An ABC is a state law alternative to federal bankruptcy in Delaware, where a company assigns its assets to an independent trustee who liquidates them and pays creditors.

Can directors or officers be held personally liable in insolvency?

Generally, directors and officers are protected if they act responsibly, but they may be liable for breaches of fiduciary duty, fraudulent transfers, or unlawful distributions during insolvency.

Can individuals file for bankruptcy in Delaware?

Yes, individuals residing or having assets in Delaware can file for Chapter 7 or Chapter 13 bankruptcy in the District of Delaware federal court.

What are common mistakes to avoid during restructuring or insolvency?

Common mistakes include delaying legal advice, hiding assets, failing to communicate with creditors, and violating fiduciary duties. Early and informed legal guidance can help avoid these pitfalls.

Additional Resources

• United States Bankruptcy Court for the District of Delaware: Handles all federal bankruptcy cases in Delaware.
• Delaware Court of Chancery: Specialist court for corporate disputes, including some insolvency matters.
• Delaware Department of State Division of Corporations: Resource for corporate records and filings.
• American Bankruptcy Institute: Provides national research and education on bankruptcy matters.
• Legal Aid Organizations: Such as Legal Services Corporation of Delaware, which may offer assistance to individuals in need.
• Local Bar Association: The Delaware State Bar Association can refer individuals to qualified legal professionals.

Next Steps

If you are facing restructuring or insolvency issues in Delaware, consider taking these steps:

• Assess your financial situation and gather documentation of debts, assets, and obligations.
• Consult with an experienced restructuring and insolvency attorney who practices in Delaware and is familiar with local courts and law.
• Review your legal options, whether bankruptcy, restructuring, workouts, or alternative dispute resolution.
• Communicate proactively with creditors to explore negotiated solutions where possible.
• Stay informed about your rights and responsibilities as a debtor, creditor, or stakeholder.
• Access trusted resources and organizations to support your legal and financial decision-making.

Addressing insolvency or restructuring matters swiftly and with professional guidance can help protect your interests and position you for the best possible outcome in Delaware.