NACM Survey: “Fast-Track” Bankruptcy Proceedings Uncommon

Results from NACM’s most recent online survey show that the "fast-track"
provisions included in the Bankruptcy Abuse Prevention and Consumer Protection
Act of 2005 (BAPCPA) that allow for expedited bankruptcy proceedings for small
business debtors have largely gone unused. When asked "Have you dealt with a
debtor going through a ‘fast-track’ bankruptcy, the provisions under BAPCPA
which allow expedited proceedings for Chapter 11 small business filings?," 95.1%
replied "no" and only 4.9% responded "yes."

According to one respondent who had recently gone through their first
"fast-track" bankruptcy, the court issued a settlement to all unsecured
creditors within three months of the debtor’s filing, which was pending an
anticipated sale of the company at the end of 30 days. "The only option was to
settle at 50% (pretty good concerning the circumstances) or try your luck at a
Chapter 7," said the respondent. "Since the company was owned by a venture
capital concern, we never did obtain any financials but were able to review them
prior to receiving the fast-track claim. The courts gave us a week to decide."
The respondent noted that the debtor had made payments within the 90-day
preferential period and that their company provided a part that was critical to
the debtor’s continued operation. "It made sense to settle," said the
respondent.

"As for the ‘fast-tracking’ procedure, I believe it is viable where a company
can quickly maintain its position, settle and sell its assets to survive, as was
this case," they added. Other respondents noted that the fast-track procedure
had both advantages and disadvantages. When asked to rate the experience as
"better," "worse" or "about the same" when compared to a normal bankruptcy
proceeding, one respondent, who has gone through two "fast-track" bankruptcies
in the last eight months, replied "Worse from a standpoint, because I felt we
did not have the opportunity for input or options, and better because it
drastically sped up the process and I am not sure if we could have added or
changed anything to make a difference."

Other respondents noted that they were just currently getting involved with a
"fast-track" bankruptcy and couldn’t attest to the quality or efficiency of the
proceedings. Still, while the "fast-track" process may offer advantages to some
creditors depending on the situation, it seems that the occurrence of these
kinds of bankruptcies is decidedly rare.

Jacob Barron, NACM staff writer

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