GM, the largest company in the world, filed for bankruptcy relief this week. The government gave GM another 20 billion to usher it into a "prepackaged" bankruptcy and to give it enough cash to operate while it remains in bankruptcy. The administration confirmed that the bankruptcy was needed so that GM could be reborn as a leaner, more competitive, and profitable business enterprise. In bankruptcy, GM is expected to raise cash by selling major assets, cut down and restructure debts, void contracts, shed hundreds of dealerships, reduce union and employee benefits, restructure ownership, and reduce brand names and product lines. GM is the maker of Chevy, Cadillac, Saturn, Hummer cars and trucks and has been the flag bearer of American business in the last century. It is a sad day for all Americans that this icon of American business acumen has knocked on the door of bankruptcy court this week but the fact is, without bankruptcy protection and reorganization, GM would have collapsed after the 20 billion new infusion of government funds was used up. The cash infusion would have permitted GM to continue operating for another sixty days. Thereafter, without new funds or bankruptcy court protection, GM would not be able to pay its legal obligations. Banks, suppliers and other creditors could no longer be paid.
Isn’t it ironic to say that GM would get reborn as a profitable business after going through bankruptcy? Not in the least. Bankruptcy protects GM from all creditors and legal obligations and permits it to shed unwanted debt while allowing it to conduct business as usual. Thus, bankruptcy provides a protective wall around GM while it reorganizes and reshapes itself. A Chinese equipment maker has offered to buy Hummer, and a racecar driver has offered to buy Saturn as soon as the Chapter 11 petition of GM was filed. The Chinese company will market Hummer in China where it is perceived to be a status symbol for the new rich there. A high end Hummer will retail for $200,000 in Beijing. It’s hard to imagine how an expensive gas-guzzler can sell in a communist country but the Chinese company has made the offer to buy and the purchase is pending bankruptcy court’s approval. The British flag bearer Jaguar was sold to Tata, the largest Indian carmaker, last year. So, it’s not that surprising that the new owner of Hummer will be Chinese. The world economic order has been reshaped in the last 20 years and continues to be reshaped. Colonial powers have ceased to exist for the last half century and the new rich are making their economic strength felt worldwide.
Just like GM, individuals can also use bankruptcy law to their advantage to reshape themselves financially. An individual debtor with too much accumulated debt may qualify for a chapter 7 "fresh start", or a chapter 13 "consolidation and reorganization". For instance, if you have real estate foreclosures where the second trust deeds are going after you, a chapter 7 might solve your problems. Client’s rental property was foreclosed last year and the second trust deed holder has sent him a demand letter to collect $120,000 claiming that they received nothing from the foreclosure sale. Client is now aware that he still owes the second trust deed of $120,000 despite the fact that he has lost the rental to foreclosure. In addition, client owes $50,000 of credit card debt. His net household income of $6,000 is enough to pay for the first trust deed on his residence of $3,500, and the second trust deed on his residence of $700, plus his 2 car payments that total $800, and other necessary monthly living expenses. There is no money left to make credit card or the $120,000 rental second trust deed. Using chapter 7 bankruptcy, client will wipe out $170,000 of debt and get a "fresh start", just like GM. It’s a great deal for client!
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 July 13, 2009 in Asian Journal Los Angeles p. C4 )
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