Archive for the ‘ chapter 11 ’ Category

Indiana Rejects Peabody Bankruptcy Plan

Posted on: February 22, 2017 by in Bankruptcy, chapter 11, chapter 13, chapter 7
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Concerns over future mine cleanup costs have put the energy giant’s Chapter 11 bankruptcy on hold, at least for now.

The state of Indiana, along with some environmental groups, were among the only parties that objected to an $8 billion reorganization plan. Peabody said it would use a controversial though federally-approved plan to clean up contaminated coal mines, but the state and environmentalists, including the Sierra Club, demanded more specifics. Although the process, called self-bonding, has fallen out of favor with many firms, Peabody still uses it in four states, including Indiana. In a statement, Peabody defended its cleanup protocol. “We look forward to continuing to restore the land and provide assurances for future obligations, through a potential blend of both third-party surety bonds and self-bonding,” a company spokesperson insisted.

Other roadblocks included creditors’ objections to the proposed payment schedule and former employees’ concerns about their pensions.

Adversarial Procedures in a Chapter 7

Even though both Indiana and Illinois have rather large wildcard property exemptions that, in some cases, can exempt cash in a checking or savings account from seizure, unprotected cash is the most likely target for a turnover motion. The instant that debtors file their voluntary petitions, their nonexempt property, including nonexempt cash, becomes part of the bankruptcy estate that’s managed by the trustee (person who oversees the case on the judge’s behalf). Although the era of instant payments has mitigated this problem, the floating check controversy is a lingering issue.

Assume the debtor makes her mortgage payment on the first day of the month and files bankruptcy on the second. The debtor’s bank balance will still show those funds in the account, since the check has not cleared yet. If the trustee files a motion for turnover to claim the cash, there is a legitimate question as to who “owned” that “property” on that particular day. Although the funds were in the debtor’s account, she was not at liberty to spend them on anything else.

Adversarial Actions in a Chapter 13

Just like sound prebankruptcy planning can avoid the floating check controversy, sound prepetition planning can obviate objections to the repayment plan. Such objections normally come from either the creditors (who claim they are not being repaid in accordance with the Bankruptcy Code) or the trustees (who claim that the plan is not feasible). Creditors normally file formal objections; trustees usually state their concerns at the 341 and give the debtors an opportunity to either amend their plans or convert to Chapter 7.

Creditors are under a very strict time deadline to file their objections, and courts normally show little grace or understanding over missed deadlines. If the court does allow the objection, many times, the creditor is upset over a technical deficiency that is easily corrected. Plan objections work in much the same way, as most debtors can find additional room in their income/expense balance sheet by trimming expenses even more or by using the more labor-intensive specific allowances as opposed to the generic ones based on the debtor’s residence.

Rely on Experienced Attorneys

There is no reason to panic over postpetition objections. For a free consultation with an experienced bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. We routinely handle cases in both Illinois and Indiana.


New Republic Airways To Emerge From Bankruptcy

Posted on: February 9, 2017 by in Bankruptcy, chapter 11, chapter 13, chapter 7
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The Indianapolis-based regional airline submitted a Chapter 11 reorganization plan to a bankruptcy judge, and if it is approved, Republic should emerge from bankruptcy sometime in the first quarter of 2017.

A protracted contract dispute with its pilots meant that the carrier could not fulfill its obligations to United, American, and Delta, forcing the company into bankruptcy. In the last few months, while under the bankruptcy court’s protection, Republic has renegotiated its contracts with all three airlines and phased out its older 50-seat jets in favor of sleek new 76-seaters. Additionally, Republic has partnered with twenty college aviation programs to deepen its pilot hiring pool.

Company officials say that the plan, which details what Republic has done during reorganization and what it plans to do going forward, has the “full support” of the creditors’ committee.

Chapter 13 Endgame

In large Chapter 11 corporate bankruptcies, most of the creditors must approve the reorganization plan. Chapter 13s work basically the same way, because the trustee (person who manages the bankruptcy on the judge’s behalf) must approve the debt consolidation plan. Also, just like companies can renegotiate unfavorable contracts while they’re in bankruptcy, Chapter 13 debtors can renegotiate loans with moneylenders to obtain more favorable terms.

The debtor has leverage in these situations, because truth be told, the moneylenders want money and not banged-up collateral. For example, if a debtor is behind on a car payment and files Chapter 13, the bank does not want a used car that it must repossess, store, clean up, and sell at auction for a price that will probably be less than the outstanding loan balance. These factors are even more pronounced if the dealer has sold the note to a finance company, and that is often the case. Because the creditor knows that the debtor can very easily surrender the collateral and force the moneylender down that path, the creditor will often agree to extend the number of payments or take some similar action to make repayment terms a little more manageable.

If the parties legitimately dispute the amount owed, judges often refer these disagreements to mediation. In this forcum, moneylenders must negotiate in good faith to resolve the dispute. This issue comes up a lot in mortgage modifications, because banks often refuse aid based on technicalities. For the most part, judges will not tolerate such intransigence in mediation.

Chapter 7 Endgame

Successful Chapter 13 debtors emerge from bankruptcy with clean current payment histories and a better debt-to-income ratio than before, so they are well on their way towards complete rehabilitation. Chapter 7 rehabilitation requires a little more work, but it is not very daunting.

Most bankruptcy attorneys can refer clients to lenders who work with people that have damaged credit. Taking on an auto loan or other secured debt, and maintaining a good payment history, goes a long way towards rebuilding a FICO score.

By the same token, a credit card is also a good rebuilding tool. Because of the post-filing waiting period, most former debtors receive many credit card offers, since moneylenders know they cannot declare bankruptcy again for several years. As a rule of thumb, about 120 days or so is all it takes to convince creditors that the debtors really have turned over new leaves and are now much better credit risks than they were before.

Reach Out to Assertive Attorneys

Bankruptcy is the best way to rebuild a financial life. For a free consultation with an experienced bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. After hours appointments are available.


What Happens During Bankruptcy?

Posted on: November 23, 2016 by in Bankruptcy, chapter 11
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Trilogy Capital Management, one of the last holdout creditors in the ongoing Caesar’s Entertainment Corp. bankruptcy, agreed to support the reorganization plan. This development is good news for  the newly-christened Caesars Entertainment Operating Company Inc., because it will probably allow the company to emerge from Chapter 11 and return to business as usual.

In Chapter 11, the objective is not to begin again at the starting line but rather return the company to its prior profitability, largely by shedding excess debt and restructuring unfavorable contracts. Consumer bankruptcies are different, because both Chapter 7 and Chapter 13 are designed to give debtors fresh financial starts. To be frank, the events between the initial consultation and the six month discharge anniversary largely determine whether the bankruptcy is a “success” or a “failure.”

Pre-Filing Events

The 2005 bankruptcy reforms introduced a few new pre-filing wrinkles, but for the most part, the hurdles are not very high.

All consumer debtors must undergo pre-filing debt counselling. Most people have already been to debt counselling with Consumer Credit Counselling Services or some other similar group, but most attorneys ask debtors to undergo online counselling as well. That is because the bankruptcy trustee (person who oversees the bankruptcy on behalf of the judge) is used to seeing online completion certificates, and the smoother the initial document review goes, the better the outcome for the debtor. In most cases, online debt counselling costs less than $30 and takes less than thirty minutes.

Ten years ago, there was considerable angst over the means test, and some pundits predicted that the new requirement would effectively end liquidation bankruptcies. Essentially, to file Chapter 7, the debtors (or joint debtors) must have an annual income below the regional average. The amount varies by region and changes about every three or six months, but as of November 1, 2016, the cutoffs in Illinois are $50,133 for single filers and $90,080 for families of four. These are only presumptive amounts, because it is more expensive to live in Chicago than in Vienna, Illinois.

Post-Filing Events

All consumer bankruptcies feature a Creditors Meeting, which is oddly named because the only participants are the debtor, debtor’s attorney, and trustee. This meeting is sometimes called the “341,” after the section in the Bankruptcy Code that created it. The trustee always wants to see a picture ID and proof of Social Security number, which nearly always means a driver’s license and Social Security card. The trustee normally wants financial documents as well, such as the last three years of income tax returns.

Debtors must also complete a second round of debt counselling. In Chapter 7s, this second class is normally completed online as well; in Chapter 13s, the trustee’s office often holds free live seminars.

Post-Discharge Events

The discharge order is the fresh start, and whether the debtors move forward or not is entirely up to them. As mentioned earlier, if debtors change their financial habits as necessary, stay current on their secured debts, and begin rebuilding credit with credit cards, they are very well-positioned to take full advantage of the unique opportunity that bankruptcy provides.

Contact Aggressive Attorneys

At the Bentz Holguin Law Firm, LLC, we make the entire process as easy as possible through knowledgeable representation and open communication. For prompt assistance from an experienced bankruptcy attorney in Chicago, contact us today.


Your Business Can Emerge From Bankruptcy as a Publicly Traded Company, Just Ask Twinkies Maker Hostess

Posted on: August 5, 2016 by in Bankruptcy, chapter 11, chapter 7
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In 1930, in a suburban Chicago bakery, the Twinkie was invented. Since then, Twinkies and other hostess snacks have truly become a part of Americana. Hostess Brand owns both Twinkie and Ding Dongs and operated as a financially successful company for many years. However, over the decades Hostess has found itself in a bit of financial trouble. According to the Los Angeles Times, Hostess filed for Chapter 11 bankruptcy in 2012 and subsequently asked a bankruptcy judge for permission to go out of business. When the public heard that Twinkies and Ding Dongs were at risk of becoming relics of the past there was a run on Hostess products. Luckily for Hostess snack enthusiasts, the company eventually ended up being purchased and has had several different owners since filing for bankruptcy in 2012. Now, four years later, Hostess plans to go public again.

Does a Company Have to go out of Business After Filing for Bankruptcy?

In a nutshell, no, a company does not necessarily need to go out of business after filing for bankruptcy. However, this answer depends on the company’s financial standing, prospect of recovery, and which type of bankruptcy the company files for. When a company is unable to dig out from under its debt and would like to file for bankruptcy protection, the company has a couple of options. Under federal bankruptcy laws, most businesses have the option of filing for bankruptcy under either Chapter 7 or Chapter 11. According to the U.S. Securities and Exchange Commission, during Chapter 7 bankruptcy the company stops all operations and goes completely out of business. During a Chapter 7 bankruptcy the company liquidates, or sells off, all of its assets in order to repay as much of its debts as possible. On the other hand, if the company opts to file for bankruptcy protection under Chapter 11 then the bankruptcy court will help the company reorganize its debts with the goal of becoming profitable again and remaining in business.

What Happens to a Publicly Traded Company’s Stock After Bankruptcy?

If a publicly traded company files for Chapter 7 bankruptcy, in most cases, the company’s stock will be completely worthless at the end of the process. However, after filing for Chapter 11 bankruptcy a company’s securities can continue to be traded. Keep in mind though that most companies in this position are unable to meet the standards required to continue trading on the Nasdaq or New York Stock Exchange.

Need Legal Advice?

If you have a business in Illinois and are interested in filing for bankruptcy, contact the experienced Chicago bankruptcy attorneys at the Bentz Holguin Law Firm, LLC at (312) 881-5112. We would be happy to sit down with you during a free consultation to discuss your legal options and help determine which type of bankruptcy would be best for you and your business.

Arch Coal’s Bankruptcy Disclosure Statement Under Scrutiny

Posted on: June 16, 2016 by in Bankruptcy, chapter 11
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Arch Coal, Inc., America’s second largest coal mining company, filed for Chapter 11 (or “reorganization”) bankruptcy in January of 2011. This is a massive company that even has a mine located nearby in the Illinois Basin. According to Arch Coal’s website, the company plans to eliminate over $4.5 billion in debt from their balance sheet via their proposed financial restructuring plan. As part of the company’s bankruptcy process, they have filed a written disclosure statement. However, a coalition of American environmental advocacy groups is not pleased with the lack of details surrounding the environmental aspects of Arch Coal’s exit plan.

According to, several environmental groups, including the Sierra Club, the Ohio Valley Environmental Coalition, and the West Virginia Highlands Conservatory, are not pleased that Arch Coal’s disclosure statement doesn’t clearly describe how the company plans to pay for its mine cleanup requirements. Coal companies in the United States are required to care for the environment by providing bonds that will be used, if necessary, for environmental cleanup costs in the future. However, over the last several decades coal companies have been so strong that the federal government has allowed some of them to use their own balance sheets as collateral, rather than providing bonds. Arch Coal used this method of self-bonding, and therefore environmental groups are calling for clear language in the disclosure statement detailing the environmental obligations of the company’s future operator.

The environmental advocacy groups that have been vocal about Arch Coal’s disclosure statement are essentially insisting that the company’s responsibility to the environment under federal law cannot be overlooked during the bankruptcy process. Arch Coal has self-bonded $485.5 million for environmental cleanup costs in the future, however, the company estimates that final cleanup costs will ultimately be much less than that amount. Arch Coal’s disclosure statement has not yet been approved, but a hearing has been scheduled for early June.

Disclosure Statements

For both companies and individuals filing Chapter 11 bankruptcy, the point of the disclosure statement is to provide creditors with ‘adequate information’ about the the company’s or individual’s finances. Under federal law 11 U.S. Code § 1125, adequate information is essentially described as any information that would allow a hypothetical investor to make an informed judgment about the company’s reorganization plan. After a disclosure statement is filed, the court holds a hearing in order to consider the statement itself as well as any objections that may have been filed in response to the disclosure statement. After the hearing, the court decides whether or not to approve the disclosure statement.

Drafting a complete disclosure statement, and successfully navigating the bankruptcy waters, can be a very complicate process. Therefore, it is always a good idea to consult with a competent attorney if you are considering filing for bankruptcy protection.

Reach Out to Us for Assistance

Are you considering filing for bankruptcy in Chicago? If so, don’t hesitate to contact an experienced bankruptcy lawyer from the Bentz Holguin Law Firm, LLC at (312) 881-5112. We are eager to assist you today.