Revisited: Chapter 11 bankruptcy or bailout for the automakers?

Orantes Law Firm March 30, 2013

Revisited: Chapter 11 bankruptcy or bailout for the automakers?

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.

Power producer Dynegy completes Chapter 11 bankruptcy

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.

The role of creditors’ committees in Chapter 11 bankruptcy

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.

PACA and seller rights in Chapter 11 bankruptcy

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.

Should your company file for Chapter 11 or Chapter 7?

In our last blog post, we discussed a visual effects company that is filing for Chapter 11 bankruptcy under the U.S. Bankruptcy Code. There are, however, multiple bankruptcy options for businesses facing financial difficulty. Two of these options are Chapter 7 and Chapter 11 bankruptcy. The chart below compares these options.

Popular visual effects company files for Chapter 11

The digital production company that created the effects in James Cameron’s “Titanic” has declared bankruptcy. According to the Chief Restructuring Officer, Michael Katzenstein, Digital Domain Media Group Inc. was simply “running out of cash” and unable to restructure its debt.

The Absolute Priority Rule in Chapter 11 Bankruptcy

The absolute priority rule determines who should receive payment first in event of a business liquidation through Chapter 11 bankruptcy. It goes into effect when one or more creditors listed as a “senior” class under the rule (such as bank creditors) objects to the bankruptcy plan.

Orantes Law Firm confirms two more chapter 11 cases in September and no objections have been filed to confirmation of a third one next week

Two clients with rental properties attempted by all other means available to them to lower the monthly payments to amounts that better matched the rent the properties now generate to no avail. One of them even hired a different purported “Chapter 11 attorney” who did nothing for her, except waste her time and money. Finally, after retaining the Orantes Law Firm and obtaining confirmation of their cases, they now have lowered their monthly mortgage payments to amounts that allow them continue to operate their rental properties and support themselves.

The bankruptcy discharge in detail

In the last blog post, we discussed debt that is not dischargeable in bankruptcy. There is, however, a lot more to bankruptcy discharge than which debts are dischargeable and which are not.

First, many people considering bankruptcy are frightened that they will lose their house, their car, even the clothes on their backs. This is not true. You will not lose everything in order to pay back creditors. In fact, you may lose nothing at all.

What debts are not dischargeable in bankruptcy?

Under federal bankruptcy law, there are some debts that cannot be discharged during bankruptcy. It is important to understand what these debts are if you are considering filing for bankruptcy, especially if you are trying to decide whether to file for Chapter 7 or Chapter 13.