Categories
Business & Commercial Bankruptcy

Nationwide Ambulance Provider Files for Bankruptcy

Running a business at any time can be difficult and stressful. However, over the last few years, running a business has been nearly impossible. It does not take very many missed or late payments for a business to be in financial trouble. This may leave the owner with few options to get out of debt. One option is to file for business bankruptcy. This is a way for business owners to get out of debt while also allowing the owner to reorganize.

An ambulance operator, Rural/Metro Corp., filed for Chapter 11 bankruptcy protection last week. The company continues to provide ambulance services but is facing substantial debt.

Rural/Metro is based in Arizona and provides emergency services nationwide. The company missed an interest payment in July, which lowered their debt and credit rating. The company filed for bankruptcy in Delaware; they listed their assets and debts at almost $500 million.

It does not take many missed or late payments to cause substantial problems to the business, which then causes many business to face the possibility of bankruptcy. One of the benefits of bankruptcy is that all creditor actions are stopped when the business files for bankruptcy protection. This includes mechanics liens and repossessions.

Bankruptcy also allows the company to create a debt reorganization plan. In many cases, this plan will reduce interest payments. It may also reduce or eliminate penalties or fees that were accumulated under the late or missed payments.

Filing for bankruptcy protection can significantly turn the ability of the business around to allow it to continue to operate. It can provide the business owner needed relief to prevent the loss of his or her business.

Source: Buffalo Business First, "Rural/Metro to continue services after bankruptcy filing," Aug. 5, 2013

Categories
Chapter 11

How Much Does Bankruptcy Cost: A Look At Attorney Fees

In most bankruptcy cases, the fees an attorney charges are disclosed. In fact, the Court also provides guidelines covering the range of legal fees applicable to work on consumer bankruptcy cases. In chapter 11, an attorney is paid after filing a motion for compensation which lays out exactly how much the attorney is charging and how much time was spent on particular tasks.

However, it seems that in chapter 9 (municipal bankruptcies) fees do not have to be disclosed. This means that the attorneys for Detroit could charge millions in legal fees without ever disclosing to the court or to creditors how much they are charging or what they are spending their time on. The bankruptcy judge in this case decided to take a closer look at the cost of the case, and so the judge intends to appoint an examiner to make sure that the attorneys' fees are "disclosed and reasonable." Among other things, the examiner will probably review the attorneys' fees and inform the court if they fees are out of the scope of permissible legal work. While the parties could object to the appointment of an examiner, it seems unlikely at this time.

Fortunately for most individuals considering bankruptcy, most bankruptcies are handled on a flat fee basis. This means that the price is agreed upon before the bankruptcy is filed, so that a debtor knows exactly how much he or she will be paying for a bankruptcy filing and doesn't have to worry about the hourly rate of an attorney.

Source: Tom Hals, Yahoo! News," Lawyers in Detroit bankruptcy may face scrutiny on fees," August 1, 2013

Categories
Chapter 11

Automatic Stay Prevents Lawsuits Against Detroit

Last Wednesday, the bankruptcy judge overseeing the Detroit bankruptcy case put a hold on all lawsuits that were challenging Detroit's bankruptcy filing, as well as most other litigation against Detroit. However, this does not mean an end to Detroit's legal troubles. The bankruptcy judge pointed out that his ruling did not decide whether Detroit could modify its pension benefits in bankruptcy, or even whether Detroit was eligible for bankruptcy protection.

Further, litigants can still try to seek relief from stay, allowing them to continue their lawsuits outside of bankruptcy court. Additionally, just because state and federal court litigation was put on hold doesn't mean litigation can't occur in the bankruptcy court itself. In fact, this is what the bankruptcy judge wants to occur. The judge believes that having the issue of Detroit's eligibility for bankruptcy litigated in one forum will save Detroit both time and money, which will give Detroit a better chance at a successful reorganization.

As the Detroit bankruptcy case shows, the automatic stay is a very powerful thing. Fortunately for debtors, the automatic stay is not limited to municipal bankruptcies. If an individual files for bankruptcy, he or she will also benefit from the automatic stay. This means that all lawsuits against him or her, as well as foreclosures and other collection actions, will be put on hold.

Source: Robert Snell and Chad Livengood, The Detroit News, "Judge rules he has sole jurisdiction in Detroit bankruptcy, freezes suits against city, Snyder, EM," July 24, 2013.

Categories
News

California Grocery Chain Files for Bankruptcy

Businesses face many challenges but can also reap several benefits. Business owners must manage all the issues that arise in a business such as submitting and paying for orders, hiring and paying employees, paying rent or buying the location. Business owners also get the satisfaction of being their own boss and managing it how he or she wants to manage it. But business owners can also be affected by changes in the economy. For example, the recent economic downturn has forced many business owners into business bankruptcy because they see no alternative way out of the debt they are dealing with.

A local family owned business in Northern California, Mi Pueblos, has filed for Chapter 11 bankruptcy. This grocery store chain has filed because of a dispute with a secured creditor. The chain has indicated that it is not currently defaulting on any obligations.

The grocery chain has stated that customers will not be affected by the change, and employees will still be paid and stores will remain open. The filing has just caused them to go through reorganization in order to deal with their creditor.

Filing for bankruptcy places an automatic stay on all creditor actions. It also stops all liens and repossession of business property. Filing for bankruptcy also allows the business to create a debt reorganization plan. This creates a repayment plan for the business to repay their debts to creditors and vendors. In many cases, interest payments and fees may be reduced or even eliminated.

Businesses require significant cash flow to operate and pay expenses including payroll and orders. When this is impaired by events such as a recession or business disaster, debt relief such as filing for bankruptcy may be the best option. The first step is to understand the options the business has. If they qualify, a knowledgeable professional will be able to guide them through the process efficiently and effectively.

Source: CBS SF Bay Area, "Mi Pueblo grocery store chain files for Chapter 11 Bankruptcy," Mike Colgan, Jul. 22, 2013

Categories
Chapter 7

Treasure Hunter's Bankruptcy Dismissal Faster than Most Cases in Rancho Cordova, CA

The vast majority of bankruptcy cases are voluntary in Rancho Cordova, CA. When a business or person has trouble paying debts filing for bankruptcy helps create debt relief. However, in very rare cases, it is possible for creditors to force a person into bankruptcy.

This is what happened to Tommy Thompson, a treasure hunter. In the 1980s, Mr. Thompson found the wreckage of a ship that had sunk in 1857. The ship was carrying 18 tons of gold. As far as we know, Mr. Thompson was able to recover approximately $100 million worth of the gold and other treasures.

However, his partners and investors wanted their share, and they have all been fighting over the money since it was found. Apparently in an attempt to get paid, a group of creditors filed an involuntary bankruptcy petition against several of Mr. Thompson's companies. The petition was granted and the companies ended up in bankruptcy involuntarily.

Now, a receiver that was appointed by an Ohio court to run the companies is asking the bankruptcy judge to dismiss the bankruptcy case. As for Mr. Thompson, he disappeared after a judge in a different case issued an order for his arrest.

Source: Patrick Fitzgerald, The Wall Street Journal, "Receiver Wants Fugitive Treasure Hunter's Bankruptcy Case Tossed," July 15, 2013.

Categories
Chapter 11

ResCap files Its Chapter 11 Plan

Running a business can be great. However, it is always possible for a business to fall into hard times, and when it does, it can be difficult to recover. One option for businesses that are in financial trouble is chapter 11 bankruptcy.

Residential Capital LLC (ResCap) filed for bankruptcy protection on May 14, 2012. ResCap is the mortgage lending unit of Ally Financial. ResCap recently filed its chapter 11 plan, which describes how its creditors will be paid. Under the plan, junior secured noteholders will be paid in full. However, unsecured creditors will only be paid 36.3 cents on the dollar (they will receive approximately $779 million of the $2.15 billion that they are owed).

A large portion of these payouts will come from ResCap's parent company, Ally Financial. In return for a release of liability from claims by ResCap and its creditors, Ally will pay ResCap $2.1 billion.

The plan is not yet binding. First, the disclosure statement (which in this case is 399 pages) must be approved. Then, the plan needs to be voted on by creditors and approved by the bankruptcy court. So, ResCap has a ways to go before its bankruptcy is complete.

If a business is considering bankruptcy it should consult with an experienced bankruptcy attorney to go over its options. One of the biggest benefits of bankruptcy is the automatic stay, which temporarily puts a halt to almost all creditor actions, including foreclosures and lawsuits.

Source: Jonathan Stempel, Reuters, "Ally's ResCap unit files bankruptcy plan," July 5, 2013

Categories
Business & Commercial Bankruptcy

San Jose Orchard Supply Hardware Files for Bankruptcy

Many individuals dream of owning their own business. They want the freedom to be their own boss and the ability to grow and expand at whatever rate works for them. But when there is a change in the economy, many businesses may face financial hardship. This may be so serious as to require the owner to file for business bankruptcy.

The San Jose based home improvement chain, Orchard Supply Hardware, filed for Chapter 11 bankruptcy protection recently. The filing includes a deal that may sell 60 of its 91 stores to Lowe's.

If the deal goes through, Lowe's may continue to operate the stores as a separate business while keeping the Orchard name. The agreement hinges on Lowe's winning the bankruptcy auction.

Orchard was founded in 1931. During the recession, annual sales dropped by more than 20 percent. Sales have begun to turn around but representatives from Orchard say that they remain burdened debt acquired during their spin-off from Sears in 2011.

Orchard stores average about a third of the size of Lowe's. Experts say that even if many of the stores aren't bought by Lowe's, the opening of that size real estate will be great for the market. There are many retailers that are in the market for property of that size.

Filing for Chapter 11 bankruptcy can put a stop to all creditor's actions including mechanics' liens and repossession. Bankruptcy allows a business to create a debt reorganization plan. This can allow reduced interest payments and reduced or eliminated penalties and fees.

Source: The Sacramento Bee, "Orchard Supply Hardware files Chapter11; Lowe's may buy at least 60 stores," Dale Kasler, Jun. 19, 2013

Categories
Business & Commercial Bankruptcy

American Airlines Looks to Merge to Exit Chapter 11 Bankruptcy

Running a business can be both a rewarding and difficult experience. When the economy changes, it can substantially affect a business owner's ability to run their business. Sometimes, the only way for the owner to get their company out of a tough situation is to file for business bankruptcy.

On Tuesday, a bankruptcy judge allowed American Airlines to pay a severance package to its chairman and CEO. This ruling sets the stage for American to exit Chapter 11 bankruptcy and merge with US Airways. The decision still requires the approval of American's creditors.

American filed for Chapter 11 bankruptcy 18 months ago. They also tried to negotiate with their employee unions to lower operating costs. US Airways and American announced a merger at the end of last year.

The issue holding up the merger was the severance package for the executives. The Bankruptcy Code prevents any severance package given to a CEO to be more than ten times the amount given to the average employee. Generally creditors must approve any reorganization or merger plans.

There are two types of business bankruptcy. One liquidates the business to pay off creditors. The other creates a debt reorganization and repayment plan. Both can help a business get out of a tough financial situation and can provide the business a fresh financial start, like in the case of American Airlines.

One of the major benefits of filing for bankruptcy is that all creditors actions are stopped immediately. This includes liens and repossession. A debt reorganization plan will generally decrease interest payments and penalties or fees are reduced or eliminated.

No matter the situation, if a business is considering filing for bankruptcy, they should consider their options to determine whether it is a viable option. In addition, they might qualify for various form of bankruptcy, so it is a good idea to seek out advice to understand what their best option is.

Source: The Sacramento Bee, "Bankruptcy judge removes obstacle to American-US Airways merger," Curtis Tate, June 4, 2013

Categories
Chapter 11

California Electric Car Company Files for Chapter 11 Bankruptcy

Trying to run a business is never an easy task. But the recent economic times have made this task remarkably more difficult. It does not take many missed or late payments before creditors begin harassing a business for money owed to them. In many cases, the best way to get a business turned around and out of trouble is to file for business bankruptcy.

A California-based electric car company filed for Chapter 11 protection recently. The company, CODA Holdings, filed after poor sales. They intend to get out of the auto business permanently with this filing. The company says that it will focus post-bankruptcy efforts on an energy storage business that is also under the CODA name and uses similar technology.

At the moment, a group of debtors plans to buy the company for $25 million. The company is only four years old and only has about 40 employees.

CODA is not the first electric car company to struggle financially. Only last month, an Anaheim based company laid off almost 75 percent of their work force. This company makes electric sports cars. Another company, Tesla, has yet to make a profit and the company owes the government almost $500 million in loans.

Filing for bankruptcy can put an automatic stay on creditor actions. This includes repossessions and foreclosures. Bankruptcy can allow a business time to reorganize and reduce or eliminate penalties and fees.

Companies in any type of business can experience financial difficulty. Whether due to market changes or other commercial factors, business owners in such situations should explore the possibility of chapter 11 filing, to determine if it can help save the company.

Source: The Sacramento Bee, "Electric car maker CODA files for Chapter 11," Robert Jablon, My 1, 2013

Categories
Chapter 11

Bankruptcy Leaves Sacramento Kings One Step Closer to Leaving Town

A previous post discussed that Bob Cook, a minority owner of the Sacramento Kings, had filed for chapter 11 bankruptcy. At the time, the trustee in the bankruptcy case was pushing for a sale of Mr. Cook's minority share in the Sacramento Kings to Chris Hansen, who apparently wants to move the team to Seattle. Mr. Cook, who wants the Sacramento Kings to stay in Sacramento, was trying to find a backer to help match Mr. Hansen's offer so that he could maintain his ownership.

Unfortunately, it appears that Mr. Cook was unsuccessful in finding a backer. Chief Bankruptcy Judge Christopher Klein recently approved the sale of Mr. Cook's minority share to Mr. Hansen. Mr. Hansen agreed to buy Mr. Cook's minority share for $15.1 million, and Mr. Cook was apparently unable to match this offer.

While this is not the end for the Sacramento Kings (the sale is only for a minority interest, and the NBA Board of Governors still needs to approve it), this sale puts the Kings one step closer to leaving Sacramento. This story also highlights one of the dangers of bankruptcy: once a debtor files for bankruptcy, the debtor doesn't necessarily control what happens to his assets.

Source: Dale Kasler, The Sacramento Bee/Bellingham Herald, "Bankruptcy Judge OKs Sale of 7 Percent of Sacramento Kings to Seattle's Hansen," April 16, 2013.