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Wednesday, November 18th, 2009

New Bankruptcy Chapter Proposed by Congress

A new amendment to the U.S. bankruptcy code could help troubled financial institutions reorganize their debts more effectively and eliminate the status of "too big to fail" that has prompted government intervention over the past two years.

H.R. 3310, introduced by Rep. Spencer Bachus (R-AL), is called the Consumer Protection and Regulatory Enhancement Act, and would create a Chapter 14 bankruptcy under which institutions to file bankruptcy without disrupting the nation's financial stability.

The bill is in response to the government's inconsistent reaction to the collapses of financial holding companies such as Lehman Brothers, Bear Stearns and AIG.

At the American Bankruptcy Institute's 2009 Legal Symposium in Washington, D.C., this week, Congressional staffer Daniel Flores spoke on a panel about the need for the new chapter, according to Reuters.

"No one trusts the bankruptcy bar and the courts. That's the problem," said Flores. "We don't need to abandon bankruptcy, we need to abandon government intervention that can seem inconsistent and panicky."

Most importantly for taxpayers, he bill would completely remove the option for government bailouts, leaving troubled businesses with no other safety net besides bankruptcy.

Rep. Bachus' bill, which is currently under committee consideration, would have no effect on consumer bankruptcy laws.

If passed it would be the first amendment to U.S. bankruptcy laws since the Bankruptcy Abuse Prevention & Consumer Protection Act of 2005.

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Posted in Bankruptcy News and Events | 2 Comments »

Tuesday, November 3rd, 2009

Commercial Bankruptcy Filings Jump 7% in October

On the heels of bad news for small businesses with the bankruptcy of CIT Group Inc. comes news from The Wall Street Journal that business bankruptcy filings rose 7% in October, after falling for several consecutive months.

A total 7,771 businesses filed for bankruptcy protection in October, up from the 7,271  in September. The increase continues a yearly trend of rising bankruptcies from the same time last year, despite what had been a drop in filings from month-to-month in August and September.

A report from the business information company Equifax Inc. suggests that, from the third quarter of 2008 to the third quarter of 2009, commercial bankruptcy filings among small businesses increased by 44%.

The Wall Street Journal cites the same tight credit market and decreases in consumer demand for products fueling the wider recession as continued causes for businesses going into bankruptcy.

Retail, Real Estate Hardest Hit

Retail businesses and real estate are the industries that continue to lead in bankruptcy filings. The impact of flagging success in these areas, however, can lead to a trickle-down effect with a much broader reach and negative financial impact on industries like home building and manufacturing, according to Georgia State University College of Law bankruptcy professor Jack Williams, who spoke to WSJ.

Bankruptcy filings are a lagging economic indicator so it's likely that we'll see bankruptcy filings increase for the next several quarters, Williams told the journal.

The bankruptcy of CIT Group Inc., one of the largest lenders to small- and medium-sized businesses, will only serve to tighten credit markets, many believe, in an already troubling environment for small businesses. CIT finances a wide array of businesses, from retail operations like Dunkin' Donuts store operators, to energy companies.

In a positive turn, the Equifax report did note that bankruptcy rates seem to be improving in some metropolitan areas like Charlotte, North Carolina, New York-White Plains, and Atlanta, also indicating that the East Coast may be experiencing an earlier recovery from the recession than the West Coast.

According to the report, California continues to be the state hit hardest with bankruptcy filings, with eight of the top 15 metro areas in terms of bankruptcy filings.

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Posted in Bankruptcy News and Events | 5 Comments »

Wednesday, October 28th, 2009

GMAC May Get Third Bailout

GMAC Financial Services,the former financing arm of General Motors Corp., may be in talks with the U.S. Treasury to receive a third financial lifeline, according to the Wall Street Journal.

GMAC has received $12.5 billion in bailout funds since December, 2008, and could receive an additional $2.8 billion to $5.6 billion in a third injection.

As part of the initial bailout, GMAC, which finances three-fourths of General Motors car loans and provides mortgages, insurance and other services, transformed into a bank holding company, which enabled it to receive Treasury aid. After the May, 2009 bailout, the U.S. government became the majority shareholder in the company.

Because GMAC backs so many new auto loans, it plays a vital role in revitalizing the auto industry, in which the government has already invested $25 billion.

General Motors, which filed bankruptcy this year, began selling off its interest in GMAC in 2006. The automaker maintained a small interest in GMAC before transferring many of its assets to the "new GM" as part is its Chapter 11 filing.

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Posted in Bankruptcy and the Economy | 4 Comments »

Tuesday, August 25th, 2009

Bankruptcy and the Bread Aisle

Even families that are particularly struggling in the current economy are still buying bread. It's the most basic kitchen staple.

And how much you pay for that bread is being impacted by the rest of economic happenings. A major bread market player decided to file bankruptcy recently in order to reorganize and offer their loaves at lower prices. According to a story over at CNNMoney:

The added competition, pressures of weaker consumer spending and the ever- constant threat of private-label rivals have also pinched other manufacturers, some of which have responded with promotions and price reductions.

The latest battle was kicked off when Interstate Bakeries Corp. emerged from bankruptcy in February. Interstate are the makers (bakers?) of longtime brand Wonder Bread. During bankruptcy they lost market share, analysts said, and are now trying to recapture it by lowering prices.

The move forced other major bread companies like Sara Lee and Pepperidge Farm to experiment with lower prices.

While the competition puts pressures on the businesses to perform, it could mean good news for anyone who buys bread - which is pretty much everyone.

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Posted in Bankruptcy News and Events, Bankruptcy and the Economy | No Comments »

Wednesday, June 24th, 2009

Debt Relief Company is Filing Bankruptcy

In a headline that seems so ironic it hurts: Texas based Debt Relief USA is filing bankruptcy.

We talk sometimes about the differences between debt relief and bankruptcy, but this news, as reported by the Dallas Morning News, makes the contrast stark.

When you file for bankruptcy, all of rulings and work and efforts are protected by law. This means that when the court says your debt is clear, it's clear. Creditors, by law, cannot continue to collect on those debts or call or make threats after your case ends.

But with debt relief, you are putting your faith, and your money, in a third party that may or may not get results.

In the case of Debt Relief USA, many customers had been sending the company money in hopes that this would be used to reach a settlement with a credti card company.

Now, that money may be completely lost. No settlement. No refunds. They're back to square one, and still vulnerable to lawsuits and repossession.

Had Debt Relief USA's customers turned to bankruptcy instead, their actions would be protected by law. So when a bankruptcy court ruled their debts would be discharged or reduced, that would decision would be final.

If you need debt relief help, be sure to do your homework and get complete, accurate information before you take any kind of action. Get informed about your options,  and how your choices will affect you and your debt.

If you have questions, speak with someone you trust. If you want to ask questions from a bankruptcy lawyer in your state, we can put you in touch a sponsoring attorney near you.

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Posted in Bankruptcy News and Events | 2 Comments »