Archive for the ‘Bankruptcy News and Events’ Category

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After waiting almost six years, unsecured creditors of Lehman Brothers Holdings' Inc. will finally see an initial payment of $4.62 billion next month.

Trustee, James Giddens, filed a notice August 15th regarding the distribution of owned payment to Lehman's creditors. Former employees, pension funds, banks and investment firms are among the creditors who will see money starting September 10th.

The payment denotes roughly 17% of total unsecured claims against the brokerage, according to the Wall Street Journal.

Lehman Brothers Inc. filed for Chapter 11 bankruptcy protection on September 15, 2008. The firm's filing was the largest bankruptcy in US history and is generally credited as a major turning point in the 2008 financial collapse.

Upon filing, Lehman claimed $613 billion in total debt and $639 in total assets, as well as $150 billion in outstanding bond debt according to a 2008 article on MarketWatch. The firm listed over 10,000 creditors in the filing.

The upcoming September payment has been postponed until the brokerage's customers were fully reimbursed: $105 billion to 111,000 former customers, according to Reuters. The 1970 Securities Investor Protection Act put into law that customer claims are to be fully repaid before creditors.

"That such a distribution is even possible represents an extraordinary achievement that was far from certain when the liquidation began," Giddens said in a news release Friday.

Additional payments are likely in the future, Giddens stated. After the initial payment to creditors, Lehman will have paid over $110 billion; $20.4 billion in claims have been processed against the brokerage and $6.8 billion in claims are still unsettled, according to the Wall Street Journal.

On August 5th, Barclays Plc. was allowed to keep about $6 million of disputed assets after its speedy purchase of the bulk of Lehman -- money Giddens was attempting to recover.

Lehman was Wall Street's fourth largest investment bank before the 2008 Chapter 11 filing.

Saturday, March 15th, 2014

Quizno’s Files Chapter 11

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In a week that first saw fast food pizza chain, Sbarro, file Chapter 11 bankruptcy, the trend continues. Yesterday, toasted-sub chain Quizno's Subs filed for Chapter 11 as well.

The company says not to worry as they have a plan in place.

Quizno's Subs' CEO said in a statement, "The actions we are taking are intended to enable Quizno's to reduce our debt, execute a comprehensive plan to further enhance the customer experience, elevate the profile of the brand and help increase sales and profits for our franchise owners."

The restructuring is focused on a debt reduction plan that takes care of $400 million.

While Quizno's Subs is mainly a franchised chain, individual franchise owners ran into problems with the prices Quiznos was charging them for ingredients. Although many prices were eventually altered, it may not have been timely enough for some.

Included in the restructuring plan is a rebate program for franchise owners and new incentives for future franchisees.

With big competitors, such as Subway, Potbelly and Noodles and Company, Quizno's has fallen behind in the world of advertising and additional investments are planned to be made in that area as another part of the restructuring plan.

Over the past 4 or so years, Quizno's Subs has gone from approximately 5,000 operations to just about 2,000; therefore, profits have fallen accordingly and advertising has been affected as a result.

Besides investing more in advertising, Quizno's has introduced toasted pastas to their menu and gone back to their original practice of adding veggies to their sandwiches before toasting.

Tuesday, March 11th, 2014

Bankruptcy for Bitcoin’s Mt. Gox

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Mt. Gox is in the hot seat as they were granted Chapter 15 bankruptcy protection by the U.S. on Monday. This move prevents traders in the U.S. from taking legal action against them for the current time, protecting their U.S. assets.

The company is fighting off fraud allegations and a proposed class action suit in Chicago. Mt. Gox, who at one time was the nation's biggest bitcoin exchange, filed bankruptcy in Japan in February.

Last month Mt. Got claimed to have been attacked by hackers which resulted in the loss of 750,000 bitcoins owned by customers. The attack supposedly was due to a glitch in bitcoin's software algorithm.

Mt. Got's founder, Mark Karpeles, has been in the spotlight throughout all of the fraud allegation talk.

Some of Karpeles actions right before the U.S. bankruptcy filing were called into question.

Attorney Jane Pearson stated, "We don't have proof yet but we do have concerns about the movement of hundreds of millions of dollars in bitcoins over the weekend, moved by Mr. Karpeles."

Attorneys for Mt. Got deny such fraudulent acts. In April, Mt. Got will be back in court as they try to get permanent stay of U.S. litigation.

Monday, March 10th, 2014

Bankruptcy Protection for Sbarro

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Melville, New York-based, Sbarro, has filed for Chapter 11 bankruptcy for the second time in three years. The pizza chain has struggled with debt and competition in the marketplace.

In the Chapter 11 reorganization plan, Sbarro hopes to cut down its debt by over 80 percent. Sbarro also plans to close approximately 50 locations, on top of the 180 money-losing operations they have already shut down.

Although the bankruptcy will not affect the franchise owned 582 restaurants, Sbarro as a company has 799 restaurants and employs over 2,700 people.

Sbarro has seen a drop off in mall traffic, where many of their restaurants are located. Their business model has also been called into question.

A restaurant consultant said, "Sbarro has been struck with an outdated business model...Its biggest shortcoming is that is sells food that has been sitting out for a while, and more people want food made to order."

Thursday, February 13th, 2014

Nickelodeon Star Files for Bankruptcy

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Nickelodeon's Drake Bell, formerly known as "Drake" from the show Drake & Josh has filed for bankruptcy.

Drake Bell is 27 years old and has experienced an income roller coaster in the last couple of years. In 2012, Drake made $408,000, while in 2013 he brought in $14,099.

His month expenses are reportedly greater than $18,000, while his monthly income is under $3,000.

Bankruptcy documents indicate that Drake owes $1.597 million on his home. The property is valued at $1.575 million.

Friday, December 13th, 2013

Fisker Bankruptcy on the Fast Track

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Instead of opening their factory in the old General Motors plant in Delaware, the plug-in hybrid automaker, Fisker, found itself in bankruptcy in November and things are moving at a rapid pace.

Creditors will have until December 30th to vote on the bankruptcy plan for Fisker and the final confirmation hearing will take place on January 3rd.

Fisker has thousands of investors, many unsecured creditors, and a committee has been selected to represent those creditors. Between them, there could be about $725,000 to divvy up.

The state of Delaware is one of the secured creditors that has received collateral from Fisker.

Last month, Hybrid Technologies, LLC bought the $168 million loan from the federal government to Fisker, at a heavy discount.

The reason the bankruptcy is being fast tracked, according to one of Fisker's attorneys, is in an attempt to retain as much of the company's value as possible.

The city of Detroit's Chapter 9 bankruptcy filing was approved by Judge Stephen Rhodes Tuesday, officially becoming the largest municipal bankruptcy case in the history of the United States.

Judge Rhodes issued a 90-minute verbal ruling this morning, to be followed by a 140-page written ruling, finding that Detroit's financial woes meet the legal requirements for bankruptcy under a Chapter 9 reorganization, ending months of uncertainty following the initial July 18 filing

“It is indeed a momentous day. We have here a judicial finding that this once proud city cannot pay its debts. At the same time, it has an opportunity for a fresh start. I hope that everybody associated with the city will recognize that opportunity,” Judge Rhodes said in a packed courthouse.

In a surprise move, Judge Rhodes ruled that Detroit will be allowed to cut pension payments as part of its debt repayment. Much of the city's financial predicament is due to obligations to retired city workers. The pensions will be allowed to be cut as long as they are deemed "fair and equitable" to other creditors of the Motor City.

A nine-day eligibility trial earlier this month gave the city's creditors, particularly unions and retiree groups, opportunity to argue against the Chapter 9 filing, and against reduced pension obligations in particular. Judge Rhodes found otherwise, and with Michigan Governor Rick Snyder's authorization in place, the historic bankruptcy case will proceed.

Congressional gridlock over a new budget has caused an indefinitely shutdown of many government services. The good news for those struggling with debt is that all federal courts will remain open and functional during the furlough. That means that if you've recently filed a bankruptcy petition or are considering bankruptcy as a debt-relief option, you won't face any additional roadblocks.

Federal courthouses are remaining open due to provisions under the Anti-Deficiency Act, which mandates that "essential" government work continues in the event of a federal funding shortfall. This provision will protect many government services until the 17th of October, at which point only the most essential services will be kept open.

The Office of the Judiciary issued a statement that it will reassess its financial situation on or around October 15, as assess whether it can continue operations during the shutdown. Until then, it will continue to process all court cases as regularly scheduled.

Leaders in Congress were unable to pass a new budget for the fiscal year that begins October 1st, as Senate Democrats were unwilling to consider a provision attached by a vocal minority of House Republicans that calls for an end to Obamacare. The President's signature health care law has a major milestone today, with mandated health care exchanges opening across the country.

One major rallying point around health care reform is the number of American's who cite their inability to pay for medical bills as a major reason causing them to file for bankruptcy protection.

Friday, September 20th, 2013

The People of Detroit Plead Their Case

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The city of Detroit, Michigan filed for Chapter 9 bankruptcy protection in July and is now waiting until late October for a trial.

While there has been much controversy over the situation in Detroit, one thing is for certain, the people of Detroit have a lot to say about it.

On Thursday, taxpayers were front and center in the courtroom instead of the attorneys. Residents and retirees were given the opportunity to express their feelings on the Detroit bankruptcy situation to a judge, for 3 minutes each.

Judge Steven Rhodes listened to many residents who expressed strong concern about what would happen to their pensions in the city's bankruptcy.

Residents spoke to their reliance on pensions and the dedication they gave to the city for so many years, "promises made, promises broken."

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Detroit filed for Chapter 9 bankruptcy protection in U.S. Bankruptcy Court in the Eastern District of Michigan today.


Detroit will now enter into a 30-90 day period to determine whether or not the city is eligible for Chapter 9 protection and all creditors will have an opportunity to fight for who will get a piece of the $18.5 billion debt.

As the largest city in the US to file bankruptcy, Detroit was the 5th largest city in the country in 1950 with a population of approximately 1.8 million people. Today, Detroit's population is under 700,000.

What used to be one of the largest manufacturing cities in the country is now a city riddled with billions of dollars of debt.

In March, Michigan Governor Rick Snyder asked Emergency Manager, Kevyn Orr, to resolve the city's overwhelming debt issue. Orr was the one to ask for Snyder's approval to file the bankruptcy.

Snyder commented, "I have reached the conclusion that this step is necessary after a thorough review of all the available alternatives, and I authorize this necessary step as a last resort to return this great City to financial and civic health for its residents and taxpayers. This decision comes in the wake of 60 years of decline for the city, a period in which reality was often ignored."