Asian Journal- The Filipino-American Community Newspaper

FREEDOM COMMUNICATIONS, owner of the Orange County Register, the largest daily newspaper in that county, as well as the owner of 32 other daily newspapers and 77 weekly newspapers filed for Bankruptcy reorganization on September 1, 2009. The company has about $1.0 billion of liabilities and assets with book value of $757 million. However, the company also said that the current fair market value of those assets is substantially less than the book value. Let’s assume that the market value is actually half the book value. Those assets would have a current market value of about $380 million. Theoretically, a liquidation of the company would pay creditors 38 cents on the dollar. However, the main lenders of the company, Chase and Union Bank, both owed a total of about $771 million, have agreed to convert the money owed them into equity in the company, and for total control of the company. Normally, in this kind of situation, shareholders are left with nothing or close to nothing. Thus, family members of the founder of the company and previous investors will end up owning not more than 2% of the company that emerges from bankruptcy. The company’s bankruptcy lawyer told the court that they expect to get through bankruptcy court on an expedited basis in a couple of months.

A substantial drop in ad revenues due to the prolonged recession and a growing preference of the younger generation to use the Internet for free news combined to force the company into seeking bankruptcy relief.

On a personal level, it is not possible to convert debt into equity where the creditor becomes part owner of the individual. For instance, if you owed $100,000 of credit card debt could you ask your creditors to convert your credit card debt into shares of you and your life? Of course not. Bankruptcy law actually gives you a better option than this. It allows you, if you qualify, to discharge or get rid of all of your debts. In addition to discharging all your debts, the law also allows you to keep most if not all of your assets using a system of exemptions. As a result, you end up owing no debt but keeping most if not all of your assets. The purpose of the law is to make you a productive citizen again. How do you become a productive citizen again through bankruptcy?

To keep $100,000 of credit cards current, you need at least $4,000 monthly. If your net income is $5,000 a month while your monthly necessary expenses for food, shelter and clothing total $4,000 a month, you only have $1,000 of disposable income left. Thus, you are short $3,000 every month to keep your credit cards current. Unlike Michael Jackson, you do not have a personal physician who can give you prescription sleeping pills to make you sleep at night. So, you stay away at night, every night, worrying about where you are going to get $3,000 this month to keep your credit card masters happy. On the other hand, if you did have a personal physician like the one Michael had, you would be able to sleep, but you may never wake up. Either way, with $100,000 of credit card debt, you become totally unproductive. You save nothing at the end of the month and yet you owe more and more debt every month. And even Michael could not figure out how he was going to be able to pay off $500 million of debt that required him to go back to work at the age of 50.

Hence if you could get rid of the entire $100,000 of credit card debt while keeping your house, cars, furniture, bank and retirement accounts, and other assets, you would certainly become a happy productive individual again, would you not? Bankruptcy court would be a better choice than sleeping pills and not waking up forever, would it not?

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.

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( Published on September 12, 2009 in Asian Journal Los Angeles p. C4 )