Preview Questions Debt Restructuring Lawyer | Role Specific Skill

Question 1: What is the primary advantage of a debt-for-equity swap in a corporate restructuring?

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It converts debt into stock, improving liquidity for the debtor

It helps improve the company's financial health by reducing interest payments

It allows the debtor to reduce the amount of debt without filing for bankruptcy

It reduces the risk of default by extending the repayment term

Question 2: How should a debt restructuring lawyer assess "financial distress," and what early indicators should be identified to initiate restructuring efforts?

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The lawyer should assess key financial indicators such as cash flow problems, declining profitability, and increasing liabilities to determine when restructuring is necessary

Financial distress should only be assessed when a bankruptcy petition is filed

Financial distress is determined only by the number of creditors seeking payment

Financial distress is irrelevant if the company is generating positive cash flow

Question 3: What is the standard for "good faith" in filing a bankruptcy petition under Chapter 11?

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The debtor must show that they intend to pay creditors in full

The debtor must prove that their business is making a profit

The debtor must demonstrate that they are attempting to reorganize in an honest and fair manner

The debtor must show that they are insolvent and need immediate liquidation

Question 4: What role do "debt-for-equity swaps" play in debt restructuring?

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They force creditors to take ownership of company assets

They guarantee repayment to creditors over a longer time period

They allow creditors to exchange debt for an ownership stake in the company

They eliminate unsecured creditors from the debt repayment process

Question 5: In debt restructuring, how should a lawyer approach the analysis of a company's balance sheet to evaluate its solvency?

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By comparing the company's balance sheet with industry standards

By analyzing past tax returns to determine profitability

By focusing solely on the company's revenue streams

By examining assets, liabilities, and equity to assess financial health

Question 6: How should a debt restructuring lawyer deal with "contingent liabilities," and what role do they play in assessing the company's overall financial health during restructuring?

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Contingent liabilities can be ignored as long as they do not affect cash flow

Contingent liabilities should be fully disclosed and considered in the restructuring process to ensure all potential future obligations are accounted for

Contingent liabilities should be dealt with after the restructuring plan is approved

Contingent liabilities are irrelevant if the company has positive net assets