The Adjustment Bureau of CMA regularly serves as disbursing agent for the administration of payments to creditors as a function of court-approved reorganization plans, out-of-court debt re-payment arrangements and distributions to creditors following liquidation of an insolvent business.
Creditor repayment plans often provide for multiple dividend payments to creditors over time. A series of payments to creditors over months or years can impose an extraordinary administrative burden on a re-organized company. In addition, creditors may lack confidence that a debtor’s management will treat creditors equally. Utilization of CMA as a third-party administrator removes from management of the re-organized or liquidated company the responsibility and liability for distributions to creditors.
CMA’s experienced staff utilizes advanced database management techniques to quickly and efficiently manipulate large amounts of claims information into accurate distributions and meaningful reports that directly respond to most inquiries. In addition, CMA uses the assembled data for frequent communication to creditors about the status of an on-going case. Because of its non-profit standing and long history of service to the credit community, CMA’s engagement as disbursing agent gives creditors the assurance that distributions will be fair, and payments will be timely and accurate.
CMA will often hold in trust, for the benefit of all creditors entitled to payments under the plan, a security interest in the debtor’s assets. The security interest granted to CMA, as stakeholder, ensures that the debtor will meet its obligations under the plan and that no individual creditors will be able to attach the debtor’s assets and receive more than the other creditors. If the debtor defaults on its obligations to fund the plan payments, CMA will seek instructions from a creditors’ committee regarding the remedies available in the plan, including foreclosure under the security interest and liquidation of the collateral, if appropriate.
Appointment of CMA as a disbursing agent is frequently a provision contained in an out-of-court debt repayment plan or Chapter 11 Plan of Reorganization. CMA’s staff can serve as a valuable resource in the drafting of plan provisions relating to distributions to creditors. Creditor acceptance of the plan signifies acknowledgment that CMA will administer payments under the plan. CMA can serve with or without bond. CMA’s standard compensation is a small percentage of the total amount distributed to creditors.