Share this Page URL

Closing up Shop > Closing up Shop - Pg. 79

Financing a Game Development Venture 79 The bankruptcy trustee has special powers under the Bankruptcy Code to maximize the sale value of company assets, including the ability to sell leases (for below-market rents, for example) despite anti-assignment provisions and to sell other assets that would otherwise be restricted by creditors' claims. The automatic stay freezes creditors' abilities to take actions to get satisfaction for their debts. This can free up cash for the trustee to pay the most pressing needs like taxes, employees, and debts guaranteed by individuals. The trustee and his lawyers will be in charge of most of the paperwork (less work for you). Disadvantages of Chapter 7 Assuming you have the option of voluntarily entering Chapter 7 (as opposed to being dragged in by a petition to the Bankruptcy Court), the following are disadvantages of filing for Chapter 7 Bank- ruptcy: · The bankruptcy trustee will probably lack industry-specific knowledge, so he is unlikely to get top dollar for saleable assets. · Insiders may be prohibited from buying technology, intellectual property, or projects in devel- opment, which are usually the most valuable assets in a development company. · The trustee will generally be paid before anyone else. · Unlike a DIY, where management has latitude in deciding whom to pay, the bankruptcy trustee must repay claims according to priorities set out in the Bankruptcy Code. · If you repaid certain insider creditors before entering bankruptcy, a trustee has the power to unwind those transactions if they are found to be legally fraudulent or preferences. · Bankruptcy can be as slow as water torture, and about as pleasant.