Client’s liabilities exceeded assets.
Client was insolvent.
Smith Schafer Approach
Informal troubled debt restructuring. We reviewed clients list of vendors and selected the largest 25 accounts. We contacted vendors to explain clients situation and to request acceptance of a discounted amount as settlement in full on the outstanding balance. These vendor’s accounts were several months in arrears. Those who chose to participate signed a simple document acknowledging partial payment as payment in full.
Fractional payments ranged from 20-50 percent of the original balance. Many of these vendors continued to sell to this company although some required COD terms. Client was able to reduce accounts payable by about $45,000 which allowed the company to become solvent and avoid bankruptcy.
Smith Schafer Services