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The debates between President Barack Obama and Governor Mitt Romney have touched on the auto bailout and whether there was a bankruptcy alternative. According to Romney, the government should have “Let Detroit Go Bankruptcy” (that was the title of his opinion article in The New York Times in 2008). He asked the government to put the automakers through a managed bankruptcy, rather than bailing them out.

Dynegy, an electric power producer that operates gas-fired and coal power plants in California and four other states, recently emerged from a three-month bankruptcy and is being publicly traded again. The case is an example of how even a contentious Chapter 11 bankruptcy can help a company emerge from debt successfully.

Appointed by the U.S. trustee in Chapter 11 cases, creditors’ committees are managed by the bankruptcy trustee and are usually comprised of unsecured creditors with multiple claims against a debtor. Their impact on a Chapter 11 bankruptcy can be significant, depending on the specifics of the case.

What is a PACA trust and how do you perfect your PACA rights to ensure that you are paid during a Chapter 11 bankruptcy?

Produce sellers have a unique tool in federal law that allows them to secure payment even if they are not considered priority creditors in Chapter 11 bankruptcy. This tool lies in a 1984 amendment to the Perishable Agricultural Commodities Act (PACA). Congress, concerned about stability in the nation’s produce industry due to a significant increase in non-payment, decided to protect produce sellers’ right to payment through trusts.


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