A Non-Bankruptcy Workout Could Be The Solution You Need

For anyone facing the thought of filing bankruptcy, the entire ordeal can feel like the end of the road financially. While bankruptcy is in place to help individuals get back on track and resolve their debts, it’s still an overwhelming experience with some negative connotations, which results in many people opting not to file and instead trying tactics that aren’t very successful.

Bankruptcy is a very drastic option for most, but for some people considering filing for bankruptcy in Florida, there is an alternative solution that their bankruptcy attorney can suggest. This is known as a non-bankruptcy workout.

What is a non-bankruptcy workout? 

A non-bankruptcy workout resembles an out-of-court settlement, but it’s strictly reserved for bankruptcy cases. Where a normal bankruptcy process involves all of an individual’s creditors, multiple court approvals, and several other intricacies, a non-bankruptcy workout is a bit more straightforward, works directly with creditors, and can involve fewer headaches.

For one, a non-bankruptcy workout can be less expensive than a traditional bankruptcy filing. Because there are little to no court costs and the process tends to be much quicker, an individual owing a lot of debt can save quite a bit of money by choosing this option. This process is also not as formal as the alternative. Rather than having to comply with the notice and hearing requirements of the Bankruptcy Code and Rules, a non-bankruptcy workout agreement doesn’t need to go through so many checks and channels prior to approval.

A traditional bankruptcy case is made public knowledge upon filing, whereas a non-bankruptcy workout can be kept more private to protect the parties involved. The debtor has no legal obligation to publicize the agreement, and many settlements are made with conditions of privacy. The only reason this would not be the case is if the creditor is a public traded company or is otherwise a well-known entity – these two reasons would make the case more newsworthy.

How it works 

A non-bankruptcy workout is favored by many due to the fact that it does not follow all the same rules as a traditional bankruptcy case. Instead, the process gives the debtor a lot more freedom to make certain decisions and acts as an out-of-court agreement between the debtor and creditors to repay the debt owed.

At the beginning of a non-bankruptcy workout, a debtor, or their attorney, meets with creditors – either individually or altogether – to decide on what is known as a composition. Essentially, a composition is a reduced total agreed upon by both parties that, when paid in full, relieves the debt owed. Once the composition is agreed upon, the debtor repays their debt within the terms of the agreement.

Another form of a non-bankruptcy workout closely resembles an extension. The debtor can simply request more time to repay their debts and, if agreed upon by the creditor, fulfills the terms of the extension agreement.  The flexibility of a workout allows for temporary lulls in income or cash flows that may allow a debtor to pay at a later date, instead of filing for bankruptcy now.

Where to find help with a non-bankruptcy workout

While a non-bankruptcy workout is a pretty straightforward process, recruiting a knowledgeable bankruptcy attorney can help answer any questions and prepare you for coming face to face with the creditors who are seeking repayment.   In addition, a bankruptcy attorney can help you determine when a workout is no longer feasible, and when bankruptcy instead should be used.

At Kelley Kaplan & Eller, our West Palm Beach bankruptcy attorneys are dedicated to helping those facing outstanding debt receive fair treatment from their creditors and other parties involved in their case.   Not everyone’s case is the same, and bankruptcy should always be viewed as the option of last resort.

If you want to learn more about how non-bankruptcy workouts in Florida, or you simply want to explore all your options, reach out to us today to set up a consultation.

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