Toolkit · Bankruptcy
The Business Restructuring and Creditor Rights Toolkit
26 U.S.C. § 6672
- Type
- Toolkit
- Jurisdiction
- National
- Date
- 2025-10-25
- Topic
- Bankruptcy
This toolkit supplies the working documents a distressed business and its creditors actually need. It opens with the thirteen-week cash forecast template and an obligation triage sheet, because those two documents determine which options remain available. It provides a guaranty and cross-default inventory, an option comparison worksheet, and a cash collateral term sheet covering the issue that most often causes a filing to fail in its first week. Additional tools include a forbearance agreement framework, a first-day motion checklist, a monthly operating report discipline sheet, and a lease and contract decision matrix that quantifies the rejection decision. Creditor materials include a preference defense worksheet, a claim protection checklist, and a demand response framework. Governance materials cover board deliberation minutes and a personal exposure audit for owners and officers. A routing table points to the other UpLaw resources each situation requires.
The Business Restructuring and Creditor Rights Toolkit
Bankruptcy > Business Bankruptcy and Restructuring | Published 25 October 2025 - Updated 20 August 2026 | UpLaw - uplaw.us
Everything here exists to answer one question early enough to matter: how many weeks of cash remain, and what does that make possible.
Tool 1 — Thirteen-week cash forecast
⭐ Build this first. Almost no distressed business has one, and no useful decision can be made without it.
| Line | W1 | W2 | W3 | W4 | W5 | W6 | W7 | W8 | W9 | W10 | W11 | W12 | W13 |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Beginning cash | |||||||||||||
| Collections — customer A | |||||||||||||
| Collections — customer B | |||||||||||||
| Collections — all other | |||||||||||||
| Other receipts | |||||||||||||
| Total receipts | |||||||||||||
| Net payroll | |||||||||||||
| ⭐ Payroll taxes | |||||||||||||
| Rent | |||||||||||||
| Debt service | |||||||||||||
| Insurance | |||||||||||||
| Utilities | |||||||||||||
| Critical vendors | |||||||||||||
| Other disbursements | |||||||||||||
| Total disbursements | |||||||||||||
| Ending cash |
☐ Use actual dates money moves, not terms. ☐ Use realistic collection timing, not invoice due dates. ☐ Identify the week ending cash goes negative. ⭐ That date is the deadline for every decision. ☐ Update weekly. A stale forecast is worse than none. ☐ Track availability under any borrowing base separately.
Tool 2 — Obligation triage sheet
| Priority | Obligation | Amount | Due | Consequence of nonpayment | Paid? |
|---|---|---|---|---|---|
| ⭐ 1 | Trust fund payroll taxes | ⚠ Personal liability under 26 U.S.C. § 6672, non-dischargeable | ☐ | ||
| 2 | Net wages | Officer liability in several states; business stops | ☐ | ||
| 3 | Withheld benefit contributions | ⚠ Plan assets — 29 U.S.C. § 1104, 29 U.S.C. § 1109 | ☐ | ||
| 4 | Secured debt | Foreclosure, repossession | ☐ | ||
| 5 | Critical vendors | Revenue stops | ☐ | ||
| 6 | Everyone else | Suits, judgments | ☐ |
⚠ Do not: ☐ Pay the loudest creditor — recoverable under 11 U.S.C. § 547 and it buys nothing ☐ Repay insider or owner loans — reachable for a full year ☐ Distribute to owners while insolvent — personal liability plus an avoidable transfer under 11 U.S.C. § 548 ☐ Order goods you cannot pay for — potential fraud exposure, not merely debt
Tool 3 — Guaranty and cross-default inventory
⚠ The automatic stay under 11 U.S.C. § 362 protects the debtor only. Complete this before choosing any path.
| Agreement | Counterparty | Guarantor(s) | Amount guaranteed | Cross-default? | Terminates on filing? | Collateral |
|---|---|---|---|---|---|---|
| Bank loan | ☐ | ☐ | ||||
| Equipment finance | ☐ | ☐ | ||||
| Building lease | ☐ | ☐ | ||||
| Equipment lease | ☐ | ☐ | ||||
| Key vendor | ☐ | ☐ | ||||
| Credit card / line | ☐ | ☐ | ||||
| Franchise agreement | ☐ | ☐ |
☐ ⭐ Owners are routinely surprised by what they signed years ago, and the answer frequently changes the strategy.
Tool 4 — Option comparison worksheet
| Question | Answer |
|---|---|
| Weeks of cash remaining | |
| Operating margin, excluding debt service | |
| Total secured debt / collateral value | |
| Total unsecured debt | |
| Total debt (for small-business track eligibility) | |
| Number of creditors whose consent a workout requires | |
| Is there a buyer? At what price? | |
| Is there a lease or contract worth rejecting? Annual savings? | |
| Are there personal guarantees? | ☐ |
| Are payroll taxes current? | ☐ |
| Can the company fund professional retainers now? | ☐ |
| Will the secured lender consent to cash collateral use? | ☐ |
| Option | Viable? | Why / why not |
|---|---|---|
| Workout | ☐ | |
| Assignment for benefit of creditors | ☐ | |
| Receivership | ☐ | |
| Orderly wind-down | ☐ | |
| Chapter 7 — ⚠ no corporate discharge, 11 U.S.C. § 727 | ☐ | |
| Chapter 11 — 11 U.S.C. § 1101 et seq. | ☐ | |
| ⭐ Small-business track | ☐ |
☐ ⭐ The decisive framing: separate operating performance from capital structure. Positive operating margin plus unpayable debt is exactly the case the system was built for. ☐ Confirm eligibility under 11 U.S.C. § 109; watch for involuntary petitions under 11 U.S.C. § 303.
Tool 5 — Cash collateral term sheet
⚠ Solve this before filing. A debtor without a cash collateral agreement or order frequently cannot make week-one payroll.
CASH COLLATERAL STIPULATION — key terms
- Consent. Lender consents to the Debtor's use of cash collateral under 11 U.S.C. § 363 through [date].
- Budget. Use is limited to the attached weekly budget, with a permitted variance of [ ]% on a [line-item / aggregate] basis, tested [weekly/biweekly].
- Adequate protection. Lender receives, under 11 U.S.C. § 361: replacement liens to the extent of diminution; a superpriority administrative claim; and monthly payments of [amount].
- Reporting. Debtor delivers a weekly variance report, a monthly operating report, and [borrowing base / inventory] certificates.
- Milestones. [Plan filed by ___; disclosure statement approved by ___; sale motion filed by ___; confirmation by ___.]
- Carve-out. Notwithstanding the liens granted, [amount] is reserved for allowed professional fees of the Debtor and any committee, plus statutory fees.
- Challenge period. Any party in interest may investigate and challenge the validity, priority, and extent of Lender's liens until [date], with a budget of [amount] for such investigation.
- Termination events. Budget variance beyond the permitted amount; missed milestone; conversion or dismissal; appointment of a trustee; failure to pay post-petition taxes.
- Remedies on termination. [Notice period], after which Lender may seek relief from stay on [ ] days' notice.
☐ ⭐ Negotiate the carve-out and the challenge period carefully — they are the two provisions that determine whether anyone other than the lender gets anything. ☐ If new money is needed, address priority under 11 U.S.C. § 364. ⭐ Whoever funds the case usually controls it.
Tool 6 — Forbearance agreement framework
For a workout, before or instead of filing.
FORBEARANCE AGREEMENT — key terms
- Acknowledgments. Debtor acknowledges the obligations, the defaults, and that Lender's liens are valid and perfected. [⚠ Negotiate this; it forecloses later challenges.]
- Forbearance. Lender forbears from exercising remedies through [date], subject to Section 5.
- Payments during forbearance. [Interest only / reduced amortization / specified schedule].
- Covenants. Weekly forecast delivery; minimum liquidity; no distributions; no new debt; no asset sales outside the ordinary course; retention of a financial advisor by [date].
- Termination events. Any covenant breach; new default; insolvency proceeding; material adverse change; misrepresentation.
- Milestones. [Refinancing commitment by ___; sale process launched by ___; equity infusion by ___.]
- Additional collateral or guarantees. [⚠ Resist. A new guaranty converts a corporate problem into a family problem.]
- Releases. Debtor releases Lender for pre-agreement conduct. [Negotiate scope and mutuality.]
- Fees and expenses. Debtor pays Lender's reasonable fees.
- No waiver. Forbearance is not a waiver of defaults.
☐ Identify every creditor whose consent is needed. ⚠ One holdout with a judgment defeats the arrangement. ☐ ⭐ Leverage comes from a credible filing threat. Analyze the bankruptcy alternative before negotiating, or you are negotiating blind. ☐ See contracts.
Tool 7 — First-day motion checklist
| Motion | Purpose | Prepared |
|---|---|---|
| Cash collateral / DIP financing | ⭐ The week-one crisis — 11 U.S.C. § 363, 11 U.S.C. § 364 | ☐ |
| Pre-petition wages and benefits | Keep employees | ☐ |
| Utilities / adequate assurance | Keep the lights on | ☐ |
| Customer programs | Preserve goodwill and revenue | ☐ |
| Critical vendors | Preserve supply, where justified | ☐ |
| Cash management | Continue existing systems | ☐ |
| Insurance and premium finance | Maintain coverage | ☐ |
| Taxes | Pay trust fund and post-petition taxes | ☐ |
| Professional retention — 11 U.S.C. § 327 | Employ counsel and advisors | ☐ |
| Claims agent | Notice and balloting in larger cases | ☐ |
| Schedules extension | Time to complete filings | ☐ |
☐ Open debtor-in-possession bank accounts on day one; close pre-petition accounts. ☐ ⚠ Do not pay pre-petition debt without an order, including the critical vendor everyone assumes must be paid. ☐ Choose venue deliberately under 28 U.S.C. § 1408.
Tool 8 — Lease and contract decision matrix
Complete for every executory contract and unexpired lease. 11 U.S.C. § 365.
| Contract / lease | Counterparty | Annual cost | Market rate | Above/below market | Cure amount | Remaining term | Assume / assign / reject | Deadline |
|---|---|---|---|---|---|---|---|---|
| ☐ | ||||||||
| ☐ |
☐ ⭐ Rejecting an above-market lease is frequently the single most valuable thing a filing accomplishes. The landlord holds a capped general unsecured claim for damages. ☐ Assumption requires cure of arrears plus adequate assurance of future performance — compute the cure before deciding. ☐ Below-market leases may be assigned as a source of value. ☐ ⚠ Calendar the deadline to assume or reject nonresidential real property leases — extendable once by right, thereafter only with landlord consent. ☐ Check whether applicable law bars assumption or assignment — personal services, licenses, and some franchise agreements. See franchising. ☐ Collective bargaining agreements — special procedure at 11 U.S.C. § 1113; retiree benefits at 11 U.S.C. § 1114. See labor relations and unions. ☐ Note that rejecting a trademark license does not strip the licensee — Mission Product Holdings v. Tempnology.
Tool 9 — Monthly operating discipline
⭐ Nothing damages a debtor's credibility faster than late or inconsistent reports, and judges read them.
| Obligation | Frequency | Owner | Done |
|---|---|---|---|
| Monthly operating report filed on time | Monthly | ☐ | |
| Cash reconciled to bank statements | Monthly | ☐ | |
| Post-petition taxes current | ⚠ Continuous | ☐ | |
| Insurance in force, proof filed | Continuous | ☐ | |
| Budget variance report to lender | Weekly | ☐ | |
| No ordinary-course exceptions without an order | Continuous | ☐ | |
| Professional fees only via fee application — 11 U.S.C. § 330 | Continuous | ☐ | |
| Committee information requests answered | As received | ☐ | |
| Milestone calendar reviewed | Weekly | ☐ |
☐ ⚠ Post-petition tax delinquency is the fastest route to conversion under 11 U.S.C. § 1112. ☐ ⚠ Fraud, dishonesty, or gross mismanagement gets management displaced by a trustee under 11 U.S.C. § 1104. ☐ ⭐ Share information with the committee. Its professionals are paid from the estate under 11 U.S.C. § 1103, so an adversarial committee is expensive for the debtor.
Tool 10 — Plan feasibility worksheet
| Requirement — 11 U.S.C. § 1129 | Analysis | Satisfied |
|---|---|---|
| Good faith | ☐ | |
| Best interests — each dissenter receives at least Chapter 7 value | Liquidation analysis attached | ☐ |
| Feasibility — confirmation not likely followed by liquidation | Projections attached | ☐ |
| Priority claims paid as required — 11 U.S.C. § 507 | ☐ | |
| Administrative expenses paid in full — 11 U.S.C. § 503 | ☐ | |
| At least one impaired class accepts, excluding insiders | ☐ | |
| Cramdown — fair and equitable, no unfair discrimination | ☐ | |
| ⚠ Absolute priority rule — equity retention analysis | ⭐ Small-business track? | ☐ |
☐ Classification under 11 U.S.C. § 1122; ⚠ gerrymandering draws objections. ☐ Impairment under 11 U.S.C. § 1124; unimpaired classes are deemed to accept. ☐ Disclosure statement under 11 U.S.C. § 1125 — not required in the small-business track. ☐ Voting under 11 U.S.C. § 1126. ☐ Exclusivity under 11 U.S.C. § 1121; required contents at 11 U.S.C. § 1123. ☐ ⚠ No non-consensual third-party releases — Harrington v. Purdue Pharma L.P.. ☐ Confirmation binds and discharges under 11 U.S.C. § 1141.
Tool 11 — Preference defense worksheet
For a creditor who receives a demand. ⭐ Defendants who answer with organized data settle for a fraction of the demand.
| Transfer | Date | Amount | Invoice date(s) | Days outstanding | Within 90 days? | Insider? |
|---|---|---|---|---|---|---|
| 1 | ☐ | ☐ | ||||
| 2 | ☐ | ☐ | ||||
| 3 | ☐ | ☐ |
Defense analysis — 11 U.S.C. § 547
| Defense | Data needed | Result |
|---|---|---|
| Ordinary course of business | Average days to pay over 2–3 years, before and during the period | |
| Ordinary business terms | Industry norms; your standard terms | |
| Contemporaneous exchange for new value | Cash-on-delivery transactions | |
| Subsequent new value | Goods shipped after each transfer, unpaid | ⭐ Usually the largest reduction |
| Not on antecedent debt | Prepayments, deposits | |
| Debtor was solvent | Rare, but check |
☐ ⚠ A creditor who tightened terms and demanded cash on delivery in the final months is exposed precisely because it reacted sensibly. ☐ Check fraudulent transfer exposure under 11 U.S.C. § 548 and 11 U.S.C. § 544 for transfers without reasonably equivalent value. ☐ Note Merit Management Group v. FTI Consulting on the securities safe harbor.
Tool 12 — Creditor claim protection checklist
| Step | Deadline | Done |
|---|---|---|
| Verify your lien is perfected | ⚠ Immediately — unperfected liens fall to 11 U.S.C. § 544 | ☐ |
| File a proof of claim | ⚠ The bar date — absolute | ☐ |
| Administrative expense request for post-petition value — 11 U.S.C. § 503 | Per order | ☐ |
| Reclamation demand | Statutory window after delivery | ☐ |
| Twenty-day goods claim | With the claim | ☐ |
| Seek committee membership — 11 U.S.C. § 1102 | Early | ☐ |
| Move for stay relief if collateral is deteriorating | As needed | ☐ |
| Object to bid procedures | ⚠ Fast — they decide the sale | ☐ |
| Object to the plan | Per order | ☐ |
| Preserve setoff rights | Early | ☐ |
| Document every post-petition delivery | Continuous | ☐ |
☐ See secured transactions and liens and taking, perfecting, and enforcing a security interest or lien.
Tool 13 — Board deliberation minutes
⭐ A board that considered alternatives, took advice, and recorded its reasoning is defensible. One with no minutes for the final six months is not.
MINUTES — [Company], meeting of [date]
Present: [directors, officers, advisors]. Advisors: [counsel, financial advisor], present for [portions].
1. Financial condition. Management presented the thirteen-week cash forecast dated [date], showing cash going negative in week [ ]. The Board reviewed the forecast assumptions, including [collection timing, customer concentration, seasonality].
2. Solvency. The Board considered whether the Company is insolvent on a balance sheet basis and whether it is able to pay obligations as they come due. The Board noted that fiduciary duties may run to the corporate enterprise for the benefit of creditors.
3. Alternatives considered. The Board reviewed and discussed: (a) continued operation with a workout; (b) an assignment for the benefit of creditors; (c) a receivership; (d) an orderly wind-down; (e) a Chapter 7 filing; and (f) a Chapter 11 filing, including eligibility for the small-business track. For each, the Board considered cost, timing, likelihood of success, and effect on creditors and employees.
4. Advice received. Counsel advised regarding [topics]. The financial advisor presented [analysis].
5. Trust fund taxes. The Board confirmed that all withheld payroll taxes are current and directed that they remain current as the first priority on available cash.
6. Distributions. The Board determined that no distributions to equity holders shall be made.
7. Resolution. Upon motion duly made and seconded, the Board resolved to [action], and authorized [officer] to [take steps], subject to [conditions].
8. Next review. [Date].
☐ Take minutes at every meeting during distress, including informal ones. ☐ Record what was considered and rejected, not only what was decided. ☐ Note the presence and substance of professional advice. ☐ See owner disputes and business dissolution and the business divorce.
Tool 14 — Personal exposure audit
For every owner, officer, and director. ⚠ These survive every corporate remedy.
| Exposure | Applies? | Amount | Mitigation |
|---|---|---|---|
| ⭐ Trust fund taxes — 26 U.S.C. § 6672 | ☐ | Pay them first, always | |
| Personal guarantees | ☐ | ⚠ Unaffected by the company's filing | |
| Unpaid wages — officer liability | ☐ | See wage and hour law | |
| Withheld benefit contributions — 29 U.S.C. § 1104, 29 U.S.C. § 1109 | ☐ | Enforced under 29 U.S.C. § 1132 | |
| Distributions while insolvent | ☐ | Avoidable under 11 U.S.C. § 548 | |
| Insider preferences — 1 year | ☐ | 11 U.S.C. § 547 | |
| Layoff notice — 29 U.S.C. § 2101, 29 U.S.C. § 2102, 29 U.S.C. § 2104 | ☐ | Exceptions are narrow | |
| Environmental obligations | ☐ | See environmental contamination and cleanup | |
| Directors and officers coverage | ☐ | Check exclusions; consider runoff before filing | |
| Individual bankruptcy needed? | ☐ | See consumer bankruptcy |
Tool 15 — Routing table
Tool 16 — The card
- Build the thirteen-week forecast today. Find the week cash goes negative.
- Pay trust fund payroll taxes first, always. They follow you personally forever.
- Find every personal guaranty before choosing a path.
- Do not pay the loudest creditor. It buys nothing and creates clawback exposure.
- Separate operating performance from capital structure.
- Solve cash collateral before filing, not after.
- The lease rejection is usually the whole economic case.
- Expect a sale, not a reorganization.
- If a customer files: pull three years of payment history the same day.
- Call professionals at three months of runway, not three weeks.