USA Trends and Developments Contributed by: Harold D. Israel, Levenfeld Pearlstein
all parties, or when immediate action is needed to preserve asset values. Receiverships are traditionally used in situations involving real estate but are becoming more com - mon outside the real estate context as more states enact the Uniform Commercial Receivership Act, which incorporates many of the benefits of Chapter 11 (including a limited stay of litigation and the ability to assume and assign, or reject, contracts) without the costs attendant to a bankruptcy. The main advan - tages are speed and neutral control, though receiver - ship may be more expensive than an ABC or other bankruptcy alternatives. The disadvantages are that it deprives a business owner of control of its company and involves a court process. Also, an uncooperative borrower can interfere with a receivership by filing for bankruptcy. Article 9 sales: maximising secured creditor recoveries Under Article 9 of the Uniform Commercial Code, secured creditors can conduct sales of their collat - eral following default. These sales can be conducted privately or through public auctions, and, when done correctly, can facilitate a quick transfer of assets. Article 9 sales work best when the value of the secured debts is significantly more than the value of the assets securing those debts. An Article 9 sale can be completed in as little as ten days and generally does not involve a court process. A borrower, how - ever, can thwart the process by filing for bankruptcy or refusing to allow the buyer to take possession of the purchased assets. State court dissolution: the simple solution A company can simply dissolve under state law. This process is appropriate if the company can sell its assets without incurring the costs of bankruptcy or bankruptcy alternative. After the assets are sold, the company distributes the sale proceeds to creditors in the order determined by state law, informs creditors that it is dissolving, terminates its business licences, and files its final tax returns and the necessary forms with the state in which it is organised.
Choosing the right remedy The decision about which remedy to pursue is factual and will depend on, among other things: • the goals of the company owner (including whether the owner is personally liable for the company’s debts); • the nature of the debts; • secured creditor and vendor relationships; and • enterprise and asset values. Conclusion The financial headwinds of 2025 have created a chal - lenging environment that is testing businesses across many industries. It is anticipated that these chal - lenges will continue into 2026 as not all businesses will be able to pass along the costs of the tariffs, and pressure on the consumer will continue as a result of higher-priced goods, fewer jobs, and student loan repayments. For business owners and their advisers, the time to plan for potential financial distress is before it becomes critical. Those that recognise the warning signs early and take proactive steps to address their financial challenges will have a greater ability to manage the end result, including avoiding a bankruptcy or fore - closure. With proper planning, experienced guidance and realistic expectations, companies can navigate their financial difficulties and find the best remedy to financial distress.
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