Chrysler’s lawyers will appear in bankruptcy court today to inform the court the status of the chapter 11 reorganization plan as well as what kind of motions it will be filing prior to submission of the plan. The reorganization plan is required to be submitted and distributed to all parties in interest within 120 days of the filing of the case. In the meantime, Chrysler is a debtor in possession of the business, and will operate in a business as usual fashion but under the protection of the bankruptcy court. Creditors will not be able to sue Chrysler and all other legal procedures to collect debt from it will stop giving it a peaceful albeit artificial environment where it can continue operating free from the stress of creditor harassment.
At this time, we anticipate that Chrysler will take action to ask the court’s permission to raise cash by sale of assets that it wants to get rid off and to get interim financing needed for operations and will negotiate with unsecured bondholders to restructure terms and conditions of debt which may include conversion of debt into equity. It will also earmark contracts that it wants to get rid off for annulment. The focus will be on renegotiation of labor matters and dealership agreements nationwide. Creditors, employees, dealers and dealership landlords will be subject to the discretion of the bankruptcy judge who can void creditor, debt, employee collective bargaining agreements, dealership contracts and lease agreements if he believes that Chrysler needs the contract annulled to become a viable entity in the future.
Chrysler will aim to cut off all unnecessary obligations to enable it to emerge as a leaner and profitable entity once more. The plan is to sell a significant portion of assets to Italy’s FIAT which will become the majority stockholder of the resultant entity. Employees and bondholders will also become shareholders in exchange for their cooperation to reduce benefits and payments due them. As shareholders they have no right to demand payment but have the right to share in profits when that is realized. The President has called this a prepackaged bankruptcy with bail out funds contingent upon the sale of assets to FIAT. Bail out funds in the billions were given to Chrysler with the understanding that it had to get FIAT as a partner and buyer of assets. Bankruptcy was seen as a necessary step to intimidate creditors and the workers’ union into agreeing with the reorganization plan. Otherwise, the government would get nothing back from money given to Chrylser. With a prepackaged bankruptcy including FIAT’s participation, the resultant entity may be able to repay bail out funds in five to seven years. Some quarters have suggested that Chrysler should just be allowed to go bankrupt in a Chapter 7 liquidation arguing that it’s management has run the company to the ground by sheer incompetence. But the administration has argued that it is too big to be allowed to fail and it’s failure would drag the entire economy down with it. What do you think?But if you are an individual with too much debt, you will not have a benefactor to give you bail out funds to pay off your debts in the meantime. However, you can invoke Federal Bankruptcy law, the same law that Chrysler relies upon to protect itself, to get fid of your debt. You might qualify for a Chapter 7 petition where you wipe out all of your debts, secured and unsecured, including all trust deeds on real estate, credit card debts, personal loans, car loans, medical bills and all other kinds of legal obligations other than child support and student loans, or pay a portion of your debt while reorganizing your financial affairs with a chapter 13 petition. If bankruptcy law will make Chrysler productive again, it will certainly make you productive again.In these times, there is no stigma with bankruptcy. The largest and oldest companies in America have relied on bankruptcy to ensure survival.
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 May 30, 2009 in Asian Journal Los Angeles p. C4 )
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