FEATURE LAW An unfortunate fact about the pandemic is that many businesses have and will fail through no fault of their own. However, for some, Chapter 11 reorganization might be a viable and preferrable alternative to closing their doors and laying off employees. In Business spoke with local bankruptcy ex-perts to explain how this form of bankrupt-cy can help at-risk business owners contin-ue their operation, why it might be the right move when closure seems like the only other option, and some other legal options that can help save a struggling business. UNDERSTANDING BANKRUPTCY According to Nicole Pellerin, and attorney with Murphy Desmond S.C., Chapter 11 provides a means for a company to reorga-nize itself — its debts, its assets, its overall operations — and allows the company to continue operations as a “debtor-in-pos-session” (DIP) until a plan of reorganiza-tion is confirmed. When any chapter of bankruptcy is filed, Pellerin explains, an automatic stay goes into effect, which bars creditors from collecting, suing, or continuing a lawsuit. Immediately, the pressure from creditors is alleviated and the DIP can focus on oper-ating and creating a plan to restructure its debts, its operation, and whatever it needs to restructure in order to preserve value in the company, jobs, etc. “Of course, during this period of oper-ation as a DIP, the company is under the supervision and scrutiny of the court and the U.S. Trustee, and must file operating reports with the court on a monthly basis,” says Pellerin. Further, if the cash or cash equivalents the DIP needs to operate is collateral for a lender, the DIP cannot use it without first obtaining a court order. Typically, the motion to use cash collateral is filed as part of the “first-day motions,” which address certain business matters that need to be dealt with on an expedited basis to keep the DIP operating, notes Pellerin. “For example, in addition to a motion for cash collateral, other first-day motions also typically include a motion to pay employees pre-petition wages, a motion to continue utility service, and a motion to retain professionals (attorney, accountant, etc.). If the cash collateral is insufficient to maintain operations, the DIP can file a motion to obtain post-petition iStock COULD BANKRUPTCY SOLVE YOUR COVID STRUGGLES? When closure may seem like the only option left to local businesses that are drowning from the effects of COVID-19, Chapter 11 could be a viable alternative. BY JASON BUSCH W e’ve heard the staggering numbers of lives lost from COVID-19, but no less alarming are the number of business-es that have closed and will not reopen due to the ongoing effects of the pandemic. According to mid-December reports, no fewer than 22 Madison-area restaurants have closed thanks to COVID-19, and another 31 stores on State Street have also closed and do not have plans to reopen, bringing the total number of retailers on the iconic downtown thoroughfare to fewer than 120. Nearly a third of Madison-area business-44 IN BUSINESS: GREATER MADISON | FEBRUARY 2021 es responding to a community partners business survey by the Greater Madison Chamber of Commerce say that they’re likely to close by June unless something is done. And according to a survey released by the area chapter of the National Associ-ation for Catering & Events (NACE), 47% of respondents report they have already or will close their doors within eight months if no changes are made to COVID-19-related closure ordinances. Only 18% of respon-dents stated they’ll likely survive for the foreseeable future.