FOLLOWING the parade of large retailers filing for bankruptcy because of the recession, Circuit City filed for reorganization under Chapter 11 of the bankruptcy code last month, just before Christmas, hoping that good Christmas sales will generate enough cash for it to continue operating. At the same time, it was hoping to be bought by a cash rich buyer to get it out of bankruptcy. However, Christmas sales were dismal, and no buyer came forward with an offer to purchase the no. 2 electronics retailer in the country, second only to Best Buy. The Mexican billionaire who owns the largest electronics in Mexico decided to stay put South of the border and decided not to buy Circuit City. The plan was to retain 350 smaller Circuit City stores nationwide. Circuit City operates 765 stores in the United States and Canada and employs 34,000 people here, 3,000 in Canada.
Faced with weak Christmas sales, no buyer for the company, and no lender willing to extend it enough new loans to continue operating, Circuit City decided to file a motion to convert it’s Chapter 11 case to a Chapter 7 case. The Bankruptcy Judge approved the conversion and the liquidation plan on January 16. This means that instead or reorganizing, the business will be liquidated. Its assets will be sold for cash. All cash raised from liquidation will be used to pay creditors, the bankruptcy trustee, bankruptcy lawyers then stockholders. Stockholders will probably be left with nothing or maybe 5 cents to a dollar after everything is accounted for. Owners are always the bottom man on the totem pole and always the last to be paid from asset liquidation despite the fact that they provide capital to the business.
Circuit City immediately hired 4 independent liquidation companies to handle the liquidation of store inventories and issued out 60 days pink slips to 34,000 employees. Apparently, Canadian stores will remain open for business and will continue operating. But all stores located in the United States will be closed. Customers looking for bargains were disappointed when only 10 percent discounts were given on most merchandise. If you’re looking for a big discount on flat screen TVs and digital cameras, don’t buy them now. I suggest you wait for several weeks more. At that time, you will see deep discounts on these items. After all, creditors will want to be paid in cash, not merchandise.
For individuals who have too much debt, your situation is the same as Circuit City. Your income may be only enough to make minimum payments on your debts to keep them current. Any change in circumstance in the household income or expense will adversely affect your financial stability. For instance, if you are working two jobs, the loss of one job will reduce household income to force you into the hard choice of giving your family less food to eat, or keeping your credit cards current with minimum payments. Or, if your old car keeps breaking down, the cost of buying a new car will increase your monthly expense in such a way as to force you to choose between having a new car and keeping your credit cards current. When you are faced with this kind of choice, you need to seriously consider wiping out your credit card debt with a Chapter 7 petition. Federal law allows you to get rid of accumulated while allowing you to keep most if not all of your assets with a Chapter 7 bankruptcy petition. This is the same law that Circuit City relied on to protect itself. First, it filed a Chapter 11 petition to try to reorganize itself, and after failing to obtain buyers for it’s core business, it decided to convert to a Chapter 7 case. In your case, if you qualify, you can get rid of all of your debts. At the same time, you can keep your house, cars, retirement accounts, furniture, business and other assets.
If you need debt relief, contact my office. I will analyze your case personally.
***
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 January 28, 2009 in Asian Journal Los Angeles p. B4 )
| < Prev | Next > |
|---|
