Tuesday, July 21st, 2009
John Chase asked:
Avoid Bankruptcy
Bankruptcy is a legal procedure that individuals put into force when trapped in an impending financial crisis caused by a huge debt. Filing for bankruptcy gives the individual the opportunity to start afresh financially. The person filing the bankruptcy is referred to as the debtor, and the person whom he/she owes the money to is called the creditor.
The decision to file for bankruptcy is an important one, and the consequences of it must be understood before it is taken. It is an extremely difficult decision to take and better left to the discernment of lawyers who have the expertise, and are aware with the nuances such cases.
How Do I Know When I Should File For Bankruptcy?Your lawyer will of course be the best guide for you on that. But even better would be for you to use the evaluation tool on this website which answers this pertinent question for you. The evaluation tool scrutinizes individual cases in order to provide a customized solution. All you have to do is to fill a form that asks for details pertaining to the type of pending debts, any and all information about your assets, your income and a few personal details. At the end of this process, a reliable assessment of your case will be made which will help you answer this extremely difficult question.
How To File For Personal Bankruptcy?The word ‘filing’ might suggest a straightforward process, but filing for bankruptcy is far from that. The lengthy process of bankruptcy is usually best left to work out by lawyers. Reason might advice otherwise – after all it is an added expense! Yet, one must be warned that carrying out the process of filing for bankruptcy on your own requires a lot of patience and groundwork. To start with, keeping records in order is the key to filing bankruptcy properly, without making any errors. A lot of information will have to be furnished as part of the process of filing and this must be utmost care. Suffice to say, go for a lawyer!
When choosing a lawyer you must be watchful of the credibility and the background of the person you are deal with. When dealing with independent lawyers in particularly, there have been plenty of instances where lawyers don’t cater to your needs adequately because they have their hands full with many other cases. Seek the help of employee assistance programs or of course people you know and trust. A filing fee must be paid to the court; there is the possibility of paying this fee in installments. The fees of the lawyer are different although there are some public-funded legal services programs that don’t charge attorney fees when handling personal bankruptcy cases.
To learn more about bankruptcy and bankruptcy alternatives, please visit Total Debt Relief.
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Tuesday, July 21st, 2009
As a Board Certified Consumer Bankruptcy Attorney, I see people considering filing for bankruptcy each and every day from Sarasota, Port Charlotte, Fort Myers, Cape Coral, Lehigh Acres and Naples. One of the most common asked questions about bankruptcy is: Can I File Bankruptcy Right Away? The answer is yes and no. Yes, because you can. No, because you cannot just file bankruptcy without a detailed analysis of your complete financial situation.
The decision to file for bankruptcy protection, whether it be a Chapter 7 or Chapter 13 is not an easy decision anymore and should not be taken by the consumer very lightly. A great deal of thought and work goes into each and every petition that is filed with the United States Bankruptcy Court.
Also, please do not assume that anything is relevant to your situation, unless you have received the appropriate time, attention and legal advice from your attorney. Of course, there is a lot of "street talk" all over the internet about the ins and outs of bankruptcy. Unfortunately, there are many inaccuracies on the internet. This less than truthful information can hurt you, and it may cost you quite a bit of money.
Since the internet is not a confidential place, I strongly suggest that you consult with a Board Certified Consumer Bankruptcy Attorney personally to determine whether the issues that apply to your specific case are problems or not before you make any final decisions regarding filing for bankruptcy.
The reason many people want to file right away is because of the opportunity to take advantage of the Automatic Stay. One of my colleagues at the Bankruptcy Law Network, Cathy Moran, explains what the automatic stay is better than anyone. Yes, a reprieve from your creditors can be a powerful tool, and it can provide you with some time to catch a breath and gather your thoughts. However, if used improperly, it could also work against you.
If you are in the Fort Myers, Naples, Cape Coral, Port Charlotte or Sarasota area, feel free to give my office a call and speak to my secretary or paralegal to make an appointment.
This post was submitted by Carmen Dellutri, Esq., founder of The Dellutri Law Group, P.A. Currently, the firm has offices in Port Charlotte, Fort Myers, Naples and Sarasota. Mr. Dellutri also sits on the Board of American Board of Certification. Mr. Dellutri is also one of the founders of the Bankruptcy Law Network, Debt Law Network, Credit Law Network, and Mortgage Law Network. Mr. Dellutri also writes for the firm's personal injury litigation blog and the firm's mortgage modification blog.
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Tuesday, July 21st, 2009
Steve asked: In the past years, people who were in some deep financial difficulties could aid their problems with the use of a credit card. Now however, it is more difficult to do that. With the rise of job losses being reported almost every day in the news and with the credit card tightened and shrunk, we can see why bankruptcy filing today has risen tremendously.
The financial crisis in the United States can be the main cause of this problem and the future of the economy still unstable and even harder to predict, it may be such a wise thing to start bankruptcy filing today.
People that go to credit counseling agencies to seek help are in worse shape than ever financially. Not even the credit counseling agencies could do anything to help them. So as early as today, if you are experiencing some difficulties financially and cannot find the means to pay your debt, try to consider filing bankruptcy before you really find yourself in a really bad shape.
You can start bankruptcy filing today through the internet. There are many sites on the net that you can choose from but you have to keep in mind that no information on any sites is intended to replace legal advice of a professional bankruptcy lawyer. You can save some money by filing bankruptcy online.
There are two types of bankruptcy that you can either file. The most common is the chapter 7 type of bankruptcy which can be done without a bankruptcy lawyer for simple cases that can save you some money. The other second type of bankruptcy is chapter 13, which is a repayment plan or reorganization.
Chapter 7 is a straight or liquidation type of bankruptcy which means that the properties of a debtor are liquidated to cover his debts. This type of bankruptcy is a simple type that can discharge the debts of the debtor. Chapter 13, on the other hand, provides a legally agreed repayment plan that a debtor has to qualify. The debts are not completely discharged and the debtor is obliged to pay his debt, although the time period will be longer but still reasonable for the creditors.
If you already have decided to file bankruptcy by yourself, you will need to file a petition to the bankruptcy court. There are ways that you can file bankruptcy depending on the way you want things done. The easy way is to hire a bankruptcy lawyer and pay him to do all the work for you. The job of the bankruptcy lawyer is to guide you through the process, represent you in credit meetings and provide advice for your financial problems. This can sound so easy but the fee for hiring a bankruptcy lawyer can be very expensive. The cheapest process is to do it all by yourself. That can save you a lot of money which you can really use later. This way can be a little difficult if you cannot understand the basic of the bankruptcy law and how the system works.
My advice to most people who want to file bankruptcy is to do it both ways. Hire a petition preparer or a bankruptcy lawyer to prepare your papers. This can save you a lot of trouble, and the flat fee you pay them is usually worth the taking. After all your papers are done, you can do all the rest by yourself. This is the most affordable and efficient way you can ever file bankruptcy today. For more information on how to file bankruptcy affordably, visit the link below.
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Monday, July 20th, 2009
bankruptcyattorney asked:
Attorney Jamie Ryke of the Bankruptcy Law Firm Second Start in Southfield Michigan can help you save your home. In this video he explains how he can help you save your home by filing Chapter 13 bankruptcy. … bankruptcy file chapter13 lawyer michigan attorney save home
Fill This Out For Free Bankruptcy Evaluation!
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Monday, July 20th, 2009
Legal Helpers asked: Filing for bankruptcy is a scary and challenging thing. There are many laws that you must follow exactly in order to correctly file your bankruptcy, not to mention understanding each of the separate types of bankruptcy you can file. For someone that does not have any experience with filing legal documents it can be daunting to file these types of paper work. If these bankruptcy papers are not filed correctly, it can end up being a bigger problem then the one that led to the need for a bankruptcy to begin with.
If time is of the essence it maybe better for you to find an attorney that specializes in bankruptcy. A bankruptcy firm could be the easiest place to start; because they are all lawyers that have specialized in bankruptcy law and all work in the same building together. The simplest explanation of this is a law firm where all of the lawyers have specialized in bankruptcy law.
Hiring a good bankruptcy firm means that there are several lawyers within that firm that can assist you with your case. For instance if you are in a situation like foreclosure that is time sensitive but your lawyer does not have a day available to deal with this situation a lawyer in the firm can step up and assist you to prevent a worse situation then the one your already in. If you are with a solo bankruptcy attorney you could end up having a bigger problem. Hiring a bankruptcy firm could be one of the best choices during a bad situation.
When you are dealing with bankruptcy, you know that there are many questions that you would like answered. One of these questions is always going to be what happens with bankruptcy property. Property usually falls into two different categories - the property which is items that you own, and the actual property that is land or buildings. These two types of property have different rules and regulations when it comes to bankruptcy.
The rules regarding bankruptcy property are confusing because property falls into different categories. This means that when you are starting the process of filing for bankruptcy, one of the most important things that you do is take a careful inventory of your property and have your bankruptcy firm help you decide which parts of your property are parts that will be included in the bankruptcy filing, and which are not going to be included.
After you have divided up your property, you should know that when it comes to bankruptcy property, some of it is going to be counted against you, and some of it will be counted for you. The bigger pieces of property can be sold to the bank and these will help you get rid of some of your debt. The smaller pieces can be kept, and this will help you go on with your life as you usually would, even as you are filing for bankruptcy. No matter what types of property you are dealing with, you should know that bankruptcy property is always going to be confusing, so the best thing to do is to make sure that you talk to your bankruptcy advisor.
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Sunday, July 19th, 2009
Sadhana Dhanyal asked: The word bankruptcy gives rise to an image of utter helplessness. This is primarily due to the fact the there are many mis-conceptions associated with it. Often, people resort to it without even understanding its full meaning. The decision to file for bankruptcy must be based in facts. This is possible only when a person seeks expert advice.
People with multiple debt problems juggling with payments often consider bankruptcy. They feel it can offer some respite from the debt problems. If a bad credit score is attached with multiple debts, the situation can get worse. Such borrowers can make use of bankruptcy bad credit mortgage loan. Accessing these loans is not that difficult. Bankruptcy mortgage loan experts can guide any person to get a suitable loan.
One can use the loan for either buying a new house, refinancing, home improvement purpose, payoff credit cards, etc. There are many lenders in the loan market who offer such loans. One can choose from the most competitive programs. A borrower can easily get rid of credit cards, missed payments, mortgage lates and high interest mortgages.
A bankruptcy information lawyer can guide a person considering bankruptcy make a right decision. As is said earlier, the decision to file for bankruptcy must be base on facts, one should consider other alternatives if available on way to bankruptcy.
One can easily resolve debt problems by seeking their service. Following some simple steps will ensure one gets rid of all the debt problems in a short period of time. There are many debt elimination services that one can make use of. One can hop back to normalcy without filing for bankruptcy, IVA or borrowing more money that will have a person drowned in debt.
A bankruptcy lawyer can let you know the pros and cons of filing for bankruptcy. The prime purpose of Bankruptcy Law is to give a person, who is hopelessly burdened with debt, a fresh start by wiping out his or her debts. A person considering filing for bankruptcy can benefit form the service of these lawyers.
What does Chapter 7 Bankruptcy say?
A Chapter 7 bankruptcy wipes out a borrower’s debts usually within four months. The debtor has no assets that he or she would lose as a consequence of filing for bankruptcy. Chapter 7 bankruptcy gives a person a relatively quick “fresh start”. One can begin life afresh.
Chapter 13 bankruptcy
Chapter 13 bankruptcy, on the other hand is meant for people who want to pay off part of their debts over a period of three to five years. Visit our FAQ’s, which give information on most of your questions. Also visit our Audio Clips, which provide information on many of the most common concerns about debt. If your questions are still not answered we have an “Ask our Bankruptcy Lawyers” feature so you can ask one of our bankruptcy lawyers in your area a question. Filing Chapter 13 Bankruptcy can prove to be helpful if a debtor has a regular income, and thus can afford to request for such adjustments or reductions.
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Saturday, July 18th, 2009
Martin Rogers asked: By Martin Rogers
Here, at Personal Bankruptcy Avoidance, we have been trying to teach people what they should do before making a decision to file for bankruptcy. We have made emphasis numerous times of the harsh consequences that bankruptcy will bring to a person’s financial life.
We have also called bankruptcy a “last-resort method”; meaning, people should always think twice before making such tough decisions; because once you file for bankruptcy, all your financial life will be seriously affected.
The California bankruptcy system offers some legal and financial aids that are for the sole purpose to be used by those who file for bankruptcy.
Today we want to offer a way out for those people that have already made that one last decision and have filed for bankruptcy by explaining a little bit about overdraft agreements, and how they can help someone improve their situation.
One of our clients, Caitlin Stewart, has recently filed for personal bankruptcy, and she just joined our program in order to recover her financial stability and regain her credit capacity.
Martin Rogers, our California bankruptcy expert, will surely help her with any questions she has.
Caitlin Stewart
What are overdraft agreements? And Am I allowed by the California bankruptcy law to use it?
Martin Rogers:
According to the California bankruptcy laws, people who have filed for bankruptcy are allowed to make use of revolving credit accounts that have a direct relation with their bank account. These are called overdraft agreements. These accounts have a limited credit and within that amount you, as the owner of the account, can make withdrawals even if you do not have enough money in the account.
An important point about these accounts is that after the owner has withdrawn money, he or she has to pay the generated capital and interest. People have to be very careful about fulfilling the mandatory payments and above all, always pay the interest charges. Maintaining a healthy financial relationship with this type of account will be vital to recover your credit history.
Caitlin Stewart
Will using this type of account surely help me?
Martin Rogers:
The California bankruptcy laws have created this type of mechanism to help people in certain and specific situations, such as bankruptcy. The most important thing to do after surviving bankruptcy is to recover your credit score by paying on time the capital and interest charges, which credit bureaus will into your account’s behavior; and they will eventually promote the growth of your credit score. The California bankruptcy system is intended to promote the development of these specific bankruptcy cases, where people can show that they can lead a debt free life whilst fulfilling all of their financial responsibilities.
Caitlin Stewart
According to the California bankruptcy system how do I improve my credit capacity beyond that point?
Martin Rogers:
The California bankruptcy system allows people who have a constant growth on their credit reports to equally grow on credit capacity. After the credit picks up over the normal limit by using overdraft agreements, the person can apply for credit cards in order to increase the actual credit score.
Another interesting way of increasing your credit score is requesting a small unsecured loan to make acquisitions or to buy small things. Repaying these kinds of loans will add up more to your credit history, and you will ultimately gain once again the serenity of being out of debt and having a balanced financial life. In time, you will regain your normal financial life, and you will be able to use any bank or credit resource as you could in the past. The main difference is that this time, you will know how to manage it better and avoid debt successfully.
To file for bankruptcy in the California Bankruptcy system, you need the best legal advice possible. Choosing the wrong attorney could cost you your home, vehicles, or other possessions. The decision is too important to trust it to the yellow pages or slick TV commercials.
Choose California bankruptcy well established, well respected and highly skilled attorneys from law firms that deal exclusively with consumer bankruptcy.
By using our free confidential legal evaluation, you can be on your way to achieve the financial solutions you seek. We can help you protect your assets and get the fresh start you deserve.
Check these links to learn more:
http://www.personal-bankruptcy-avoidance.com/Bankruptcy/TX-Texas/Bankruptcy-TX-Texas.shtml
http://www.personal-bankruptcy-avoidance.com/Loans/TX-Texas/Loans-TX-Texas.shtml
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Thursday, July 16th, 2009
Legal Helpers asked: There are two broad forms of bankruptcy, no matter your definition - Liquidation and reorganization. Liquidation is provided for in the United States under Chapter 7 of the Bankruptcy Code while Reorganization is covered under chapters11, 12 and 13.
CHAPTER 7
Chapter 7 bankruptcy is the chapter of the Bankruptcy Code that provides for the sale of the debtor’s non-exempt assets for the distribution of the proceeds to creditors (liquidation). Usually, a trustee collects the debtor’s assets, which forms the bankruptcy estate, under court supervision and “converts” it to cash for onward distribution to creditors. This is subject to the rights of the debtor to keep certain assets, which are exempt (for example personal clothing). Also, distribution of the liquidated assets is subject to the rights of secured creditors. As may be expected, most Chapter 7 bankruptcy cases are “no assets” cases, as the debtor literally has no assets that can be liquidated.
An individual or business filing for a Chapter 7 bankruptcy case is required to begin by filing a petition with the relevant bankruptcy court serving his area or the area where the business is registered or operated with its main assets.
The petition stage can be described as the declaration stage. The debtor will also need to provide other documents to the court in addition to their petition. This may include but not limited to;
§ A schedule of assets and liabilities
§ A schedule of current income and expenditures
§ A schedule of executory contracts and unexpired leases
§ A statement of monthly net income and any anticipated increase in income or expenses after filing.
Basically, the additional documents would capture all your assets, debts and financial affairs. On the average, the process may take up to six months and may cost the debtor in terms of filing, and administrative fees. Unfortunately, you cannot file a Chapter 7 bankruptcy if you have a bankruptcy discharge in the last six to eight years and also if your current financial affairs can permit a Chapter 13 bankruptcy. Debts like priority taxes, support, student loans, liens and any debts that were reaffirmed are not discharged under Chapter 7 Bankruptcy.
CHAPTER 11
Knowing the different types of bankruptcy is very importance especially if you are into business. Always remember that businesses sometimes hit a bad spell so you have to be prepared for any eventualities. If you are a business owner, you need to know about Chapter 11 Bankruptcy also known as Re-organization Bankruptcy. Since with type of bankruptcy involves Partnerships and Corporations, it is imperative you should know about this type of bankruptcy.
Under Chapter 11 Bankruptcy, businesses are allowed to propose payment plan to their creditors. The payment plan shall include the length of time needed for the business to recover and settle its financial obligations. Although there are some provisions under Chapter 11 Bankruptcy that are similar to Chapter 13 Bankruptcy, the two are quite different in the sense that Chapter 13 bankruptcy is more concerned with individuals. The fees that apply to partnerships and corporations are also different to those fees imposed on individuals who file for bankruptcy.
What Fees Apply Under Chapter 11 Bankruptcy?
A mandatory filing fee of $1,000 and additional $39 miscellaneous administrative fees apply under Chapter 11 Bankruptcy. In cases of joint petitions, only one filing fee is imposed. Since these fees are considered as mandatory, the failure of the debtor to pay these fees may cause the dismissal of the petition. Once the case is already in progress, the business or the petitioner may be required to pay the court trustee every quarter. The amount of the fees differs depending on the amount involved. In most cases, the fees would range from $250 up to $10,000.
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Tuesday, July 14th, 2009
Groshan Fabiola asked: It’s a disaster if someone is insolvent and unable to pay their dues. Declaring bankruptcy is a disaster and understandably causes a bout of depression. But if due to circumstances, someone reaches a situation in which they have to declare themselves bankrupt, it must be done with all due care and diligence. The Minnesota Bankruptcy law gives people the facility to declare bankruptcy in two ways: Chapter 7 bankruptcy, and Chapter 13 Bankruptcy. In fact these bankruptcy options are available almost all over America, informs one Minneapolis Bankruptcy Lawyer.
Declaring a chapter 7 bankruptcy is often the fastest and the easiest way to get the deed done and over with. However, according to Minnesota Bankruptcy law, Chapter 7 bankruptcy can be declared only if the income of your household is below the Median income for Minnesota. If you feel you’re having trouble understanding the laws, it’s better to hire a Minneapolis bankruptcy lawyer who can guide you with the bankruptcy process.
In chapter 7 bankruptcy, the bankruptcy court attaches trustees who take control of your assets and negotiate with the creditors. The creditors may also move the court to halt the bankruptcy proceedings, but if everything is in order, then you will be able to proceed easily. Even after you declare bankruptcy Minnesota bankruptcy laws do allow you to keep some assets with yourself. This can include essentials like your home, vehicle, life insurance, etc. There’s an upper cap to every asset that you can keep, and a Minneapolis bankruptcy lawyer can study your assets and tell you how much you’ll be able to keep after filing for bankruptcy.
If the bankruptcy court feels that you’re in a position to pay off your debt, and have a higher income, they can prevent you from filing chapter 7 Minnesota bankruptcy. In this case you may file for chapter 13 bankruptcy. Under this system you’re allowed to pay off your debt over a period of three or five years. So your debts are delayed or re-organised instead of being wiped out. According to the Minneapolis bankruptcy lawyer we consulted, this bankruptcy option is available to all individuals and sole proprietors.
Under chapter 13 bankruptcy, you’re not free of debt, and you will have to pay the creditors after you’ve paid for necessities like food, shelter, etc. The trustee appointed by the court will review your income and prepare a payment plan for you. You’ll then have to stick to the plan, and make sure all payments are made. In case you do not make the payments, your assets may be taken over by your creditors as per the Minnesota bankruptcy law, the Minneapolis bankruptcy lawyer told us.
If you’re able to pay the planned amount as per schedule, the rest of your debts are written off, and you’re free from credit again. So this type of bankruptcy plan can help you hold on to some of your precious assets while you struggle to get your life back on track, or wait out the bad period. Remember to consult a qualified Minneapolis bankruptcy lawyer if you wish to make your Minnesota bankruptcy experience easier. After all, when you have so much trouble already on your, it is wise to leave the bankruptcy hassles to an expert who will give you sound and experienced advice.
For more resources about Minnesota DWI lawyer or even about Minneapolis DWI Lawyer please review this page http://www.thelawway.com
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Tuesday, July 14th, 2009
On June 10, 2009, the sale of substantially all of Chrysler's assets closed, just 42 days after the country's third largest automaker filed for bankruptcy protection. The closing followed a contentious sale hearing before the Bankruptcy Court, an expedited appeal to the Second Circuit Court of Appeals and a brief stay imposed by the United States Supreme Court. The source of the contention: three Indiana state pension funds, arguing that the sale of Chrysler's assets constituted a sub rosa plan of reorganization that upended the priority scheme of the Bankruptcy Code. Rejecting the Indiana pension funds' arguments and approving the sale, a decision upheld on appeal, the Bankruptcy Court avoided mention of the effect of unprecedented the governmental intervention in its analysis, relying on its interpretation of applicable bankruptcy law. As the sale process in the bankruptcy of General Motors nears completion, much has been learned from Chrysler.
The Chrysler Sale Transaction and Indiana Pensioners' Objections
Chrysler LLC and 24 of its domestic direct and indirect affiliates filed for Chapter 11 protection on April 30, 2009 in the United States Bankruptcy Court for the Southern District of New York. Shortly thereafter, Chrysler filed a motion seeking approval of the sale of substantially all of its operating assets to "New Chrysler" in exchange for $2 billion in cash and the assumption of certain liabilities. As part of the transaction, New Chrysler entered into two agreements with the UAW: a new collective bargaining agreement in which the UAW made unprecedented concessions and a settlement agreement relating to a 2008 class action that established a voluntary employees' beneficiary association, or VEBA, to fund legacy retiree health care obligations. Pursuant to the settlement agreement, the VEBA would be funded with a 55% membership interest in New Chrysler and a new $4.587 billion note. The remaining membership interests in New Chrysler would be issued to U.S. and Canadian governmental entities and a subsidiary of Fiat S.p.A. Ultimately, New Chrysler would be funded entirely by the U.S. and Canadian governments, contributing $6 billion in senior secured financing to support New Chrysler's operations after the sale.
The Indiana pension funds which challenged the sale held approximately $42 million (less than 1%) of Chrysler's $6.9 billion first-priority secured debt pursuant to an Amended and Restated First Lien Credit Agreement secured by substantially all of Chrysler's assets. The Indiana pension funds raised multiple objections to the proposed sale, including that it violated the Emergency Economic Stabilization Act of 2008 and the Troubled Asset Relief Program. However, its primary complaint was that the sale transaction constituted a sub rosa plan of reorganization that violated the priority scheme of the Bankruptcy Code because it sold all of the first lien lenders' collateral and essentially distributed the proceeds of the sale to unsecured trade creditors and the UAW.
Lesson One: A Quick Sale is Nothing More Than a Quick Sale
Section 363 of the Bankruptcy Code authorizes a debtor-in-possession, after notice and a hearing, to use, sell or lease property of the estate outside of the ordinary course of its business. However, a sale of assets under section 363 that, in essence, would direct or effectuate the terms of a reorganization plan is considered an impermissible sub rosa plan of reorganization. The rationale for barring such attempts is that they deprive creditors of the comprehensive protections normally afforded to them in the plan confirmation process, including formal disclosure, an opportunity to vote on acceptance and a fully noticed confirmation process. While a section 363 sale requires court approval and gives creditors the right to object, the more stringent and time-consuming plan confirmation requirements are not present. Thus, where a section 363(b) sale would preempt or dictate the terms of a plan, the sale should not be authorized. The Indiana pension funds argued that the Chrysler sale transaction was a sub rosa plan of reorganization in that it would sell their collateral to New Chrysler, which would use it to satisfy over $20 billion in unsecured creditor claims, leaving the first lien lenders with only 29% of the value of its collateral.
In rejecting this argument, the Court noted that the standard in the Second Circuit for determining whether to authorize a section 363 sale prior to and outside of the plan confirmation process is, simply, whether there was a "good business reason" for such a sale. The Court held there was an articulated business justification for the sale and for the necessity of completing it quickly. Moreover, the Court held that the sale was not a sub rosa plan of reorganization because the Debtors were receiving fair value for the assets being sold and all of the proceeds from the sale would be paid to the first lien lenders.
Avoiding Violations of the Priority Scheme
Chapter 11 of the Bankruptcy Code requires, among other things, that a plan be fair and equitable and not discriminate unfairly among similarly situated creditors. The absolute priority rule, a fundamental principle of U.S. bankruptcy law, provides that a plan is fair and equitable if an unsecured creditor or other priority creditor receives full value for its claim or, if it does not receive full value, thatthe holder of any junior claim will not receive any property on account of such junior claim. The words 'fair and equitable' are terms of art meaning senior interests and claims are entitled to full priority over junior ones. The Indiana pension funds argued that allowing Chrysler "to ignore the priority scheme established by the Bankruptcy Code while selling substantially all of their assets, in permanent derogation of the Indiana Pensioners' property rights, would turn the law on its head." Specifically, they argue that the sale violates the priority scheme of the Bankruptcy Code because (i) the first lien lenders will be not be paid in full while U.S. and Canadian governmental entities, junior lienholders under Chrysler's TARP debt, will receive value; and (ii) the first lien lenders' $4.9 billion unsecured deficiency claim will ultimately be treated differently than the general unsecured claims of certain trade creditors and the UAW.
In rejecting these arguments, the Court emphasized three points. First, the membership interests in New Chrysler were not issued to the UAW and the U.S. and Canadian governments on account of their prepetition claims, but rather were issued as consideration for the contribution of new value. The U.S. and Canadian governments are providing New Chrysler with approximately $6 billion in funding, while the UAW is providing New Chrysler with a skilled workforce under a more competitive cost structure and a more restrictive collective bargaining agreement. Second, the membership interests in New Chrysler were issued pursuant to agreements between each party and New Chrysler, and not Chrysler as debtor. The consideration provided by New Chrysler was not value that would otherwise inure to the benefit of Chrysler's estate, so the agreements did not divert value from Chrysler's estate or allocate proceeds from the sale of its assets. Finally, parties to contracts that are assumed in a bankruptcy case are entitled to cure payments and adequate assurance of future performance -- the Bankruptcy Code recognizes that certain creditors may receive more favorable treatment than other creditors, either in their class or a higher priority class, as part of a sale, and that such disparate treatment does not violate the priority rules.
Adequacy of Notice is in the Eye of the Beholder
Rule 2002 of the Bankruptcy Rules requires at least 20 days notice of a section 363 sale, unless otherwise ordered by the Court. While the Chrysler sale hearing began more than 20 days after Chrysler filed its sale motion, the Indiana pension funds, as well as many other parties, objected to the abbreviated and rushed sale process. As the Indiana pension funds stated in their objection, Chrysler "acted as if they were selling a Chrysler LeBaron and not a multinational corporation with billions of dollars in assets." They argued that the sale process effectively precluded anyone but New Chrysler from bidding on Chrysler's assets, was inherently unfair and failed to maximize the sale price.
In holding that the notice provided was adequate, the Court focused on the need for expedited relief to prevent the erosion of the value of Chrysler's assets. The Court found that despite the complexity of the transaction, notice of the sale was adequate where information about Chrysler's troubles were known worldwide prior to the bankruptcy, there had already been an extensive marketing attempt, and the assets were "wasting" away. Adequacy of notice is to be judged on what is adequate under the circumstances of each case.
The Lessons
The Chrysler bankruptcy case demonstrate the flexibility of the Bankruptcy Code, which has permitted Bankruptcy Courts to adapt to and confront the challenges and turmoil of these unprecedented economic times. The Bankruptcy Court's decision to approve the Chrysler sale transaction relied upon the familiar values underlying U.S. bankruptcy law: equity, rehabilitation and the right to a fresh start. Although other Bankruptcy Courts, faced with less dire consequences, may act with more deliberation, the effect of the Chrysler bankruptcy case, and the precedent it has set, is undeniable.
Authored By:
Malani J. Cademartori
(212) 332-3847
mcademartori@sheppardmullin.com
and
Blanka Wolfe
(212) 332-3822
bwolfe@sheppardmullin.com
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