THE CEO’s of General Motors and Chrysler went to Washington again this week with tin cups in hand asking for more bail out funds to stay afloat. Both companies already received $17 billion in federal loans in the last two months and have submitted their plans to Congress to show Uncle Sam how they will restructure themselves so that they can survive and pay back bail out funds. GM and Chrysler are asking for $21.6 billion more on top of the $17 billion they already got. Might as well ask for everything they can get while the Administration and legislators throw money at every economic problem they see brought about by the mortgage meltdown and the recession. While the carmakers are shuttering factories and laying off workers by the hundreds of thousands to show that they mean business to cut down on overhead, product lines and dealerships, Washington is expanding the capacities of printing presses so that more and more money can be printed to fund the bail outs. When the business gets bigger, so does the bail out. All this money being given to the titans of business, industry and banking so that very large businesses which are actually bankrupt can avoid going to bankruptcy court where they should be going in the first place to reorganize themselves. Most of the airline companies went through bankruptcy proceedings since September 11 and they have come out as leaner and profitable businesses without receiving any bail out funds from the government. And we still dare to fly with them. Why should the carmakers be treated as business prima donnas?
GM said it would run out of money by the end of March, that is five weeks from now. I guess they didn’t foresee that when they got part of the $17 billion last month. GM also said that it needs $2 billion next month and another $2.6 billion in April to remain solvent. This is a great way of saying that they are solvent now and will remain solvent in two months if they get another $4.6 billion between now and April. What they are actually saying though is that they were bankrupt last year but managed to stay afloat up to now because of the billions of federal loans they got in the last two months, but all those funds have been used up and they need another $4.6 billion to stay afloat for the next 2 months.
On the other hand, Chrysler said that their "turnaround" plan needs another $5 billion on top of the $4 billion they already got from Uncle Sam last month. The powers that be say that the carmakers will start paying their loans back in two years and thereafter pay them back in five years. But what will really happen two years from now, after they ask for billions more of bail out money, is that none of the federal loans will be paid back. These unpaid loans will have to be converted into equity. Will these loans actually save the carmakers from bankruptcy? No, because they are actually bankrupt and have been bankrupt for some time.
As individuals, you might also be actually bankrupt with too much debt and insufficient income to pay these debts off. For instance, you might owe $50,000 of credit card debt and have a mortgage that eats up half of your net income. What you do to stay afloat is borrow $1,500 more from credit cards to keep these cards current with minimum payments every month. You are in the same situation as GM. GM needs $2 billion this month and $2.6 billion next month to stay solvent after having received $14 billion in the last two months to keep it afloat. Fortunately for you, you can rely on Federal bankruptcy law to get rid of your $50,000 of credit card debt to give you a fresh start without accumulated debt. Aside from getting rid of your debts, you can keep your house, your cars, retirement accounts and most if not all of your assets.
If you need debt relief, contact my office. I will analyze your case personally.
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Lawrence Bautista Yang specializes in bankruptcy, business, real estate and civil litigation and has successfully represented more than five thousand clients in California. Please call Angie, Barbara or Jess at (626) 284-1142 for an appointment at 1000 S. Fremont Ave., Bldg. A-1 Suite 1125 Unit 58, Alhambra, CA 91803.
( Published on February 28, 2009 in Asian Journal Los Angeles p. C4 )
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