Magazine article Business Credit

NACM Adjustment Bureaus Play Key Workout Role

Magazine article Business Credit

NACM Adjustment Bureaus Play Key Workout Role

Article excerpt

The state of today's economy has drawn tremendous attention to the economic concerns facing businesses. Now more than ever, management is focusing on the credit function in order to minimize credit risks. As always, collections are a primary management concern as well.

Bankruptcies remain a "hot topic," with more and more companies resorting to the "protection" afforded by the Bankruptcy Code (11 U.S.C. Section 101 et. seq.). Credit losses from bankruptcies are increasing and businesses must now monitor the customer's performance even more closely than in the past. Lost in the influx of bankruptcies is the out-of-court workout or liquidation and the role that NACM affiliate adjustment bureaus play in the process.

An adjustment bureau is an alternative for creditors, as well as for debtors, to attempt to gain greater recoveries on unsecured claims than might otherwise be possible. Adjustment bureaus work to ensure fair and equitable recoveries by all unsecured creditors, not just one creditor. Where a debtor has expressed the desire to try to solve financial problems out of court, adjustment bureaus can effectively assist in organizing unsecured creditors.

The process for a debtor seeking to reorganize is similar to a reorganization under Chapter 11. The debtor agrees to meet with creditors at a meeting supervised by the NACM adjustment bureau. At that meeting, creditors receive information from the debtor as to financial condition, the cause(s) of difficulties, and typically, a request to agree to a moratorium on past due debts and to form an Unofficial Creditors' Committee. Creditors are provided with an opportunity to discuss the information and requests and to make a recommendation as to a suggested course of action.

Because the process is handled out of court, there is nothing binding creditors to agree except for the common goal of a greater recovery than otherwise could be obtained.

NACM adjustment bureaus bring a key element to the process -- credibility. Adjustment bureaus work to ensure that all creditors receive all the information made available to them; that each creditor entitled to participate in the effort is included; and, when distributions are ultimately made by a debtor, that all creditors receive their proportionate share of the distributions. …

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