California Power Company Filed for Chapter 11 Bankruptcy

The most recent economic downturn has taken its toll on businesses. Many businesses have been forced to turn to business bankruptcy to survive or move on from a failing business. Business bankruptcy is known as Chapter 11 bankruptcy. Filing for bankruptcy stops all creditors actions immediately, which includes mechanics liens.

A power wholesaler and its Chicago subsidiary filed for Chapter 11 protection on Dec. 12. The company, Edison Mission Energy, and its subsidiary Midwest Generation have close to $5 billion in debt. The company is based in Santa Ana but filed for bankruptcy in Chicago.

The companies have no plans of laying anyone off. Edision Mission cited low power prices, high fuel costs and environmental regulations as the reasons for its increasing debt.

Edison Mission Energy is owned by Edison International. The Edison Mission president says that he hopes that the company is able to pull out of the bankruptcy as a separate company from Edison International. The power company has close to 1,000 employees and owns over 40 power plants in California, Pennsylvania, Iowa and Illinois.

Chapter 11 bankruptcy allows a company to work with creditors and vendors to create a reorganization plan. In many cases, interest payments will be reduced and penalties and fees may be reduced or even eliminated.

It does not take much of an economic downturn to significantly affect a business. Only a minor change in revenue can cause an owner to juggle payments to creditors. Vendors will begin to cut off supplies, and creditors will begin to harass the owner for their debts. Bankruptcy can provide the needed debt relief for a business to continue operation or at least pay off creditors.

Source: Sacramento Bee, "Power wholesaler files for bankruptcy in Illinois," Dec. 17, 2012

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