In its petition to the U.S. Bankruptcy Court in Worcester, Massachusetts, Maiden Mills said the conversion would make the winding process easier for the company. A hearing is set for March 15.
Chapter 11 cases are allowed to convert to Chapter 7 as long as the debtor is still in possession. Debtors who were involuntarily forced to declare bankruptcy are not allowed to convert their bankruptcy cases.
Last month, the textile maker won court approval to sell its assets to Chrysalis Capital Partners, a private equity firm, for $44 million. Chrysalis will run the mill under the name Polartec LLC. Proceeds from the sale will be used to settle remaining costs from the Chapter 11 case and fund the conversion, the Company said.
Maiden Mills had filed for Chapter 11 Bankruptcy on January 10.
A court may elect to convert the case from Chapter 11 to Chapter 7 or dismiss the Chapter 11 case—whichever is in the best interest of the estate and its creditors. Dismissal of a Chapter 11 case does not prevent discharge of the debts in the case from dismissed in a later case under Chapter 11. Debtors are also not prevented from filing another petition. Converting a case does not change the bankruptcy filing date or the automatic stay.
Sagaria Law, P.C. represents clients in Monterey County, Santa Clara County, and Alameda County in Chapter 11, Chapter 7, and Chapter 13 bankruptcy claims. We can also help you petition to convert your bankruptcy case if necessary. Many of our client come from the Northern California cities of Carmel, Oakland, San Jose, Berkeley, Emeryville, as well as the surrounding areas. Contact Sagaria Law, P.C. today for your free consultation.
Malden Mills seeks to convert bankruptcy case to Chapter 7 liquidation, Boston Herald, March 8, 2007
Bankruptcy: Conversion and Dismissal, Lawdog.com
Related Web Resource:
Bankruptcy, Cornell Law School
Claims by each petitioner:
· American Bank $27.1 million
· Tatonka $6.2 million
· First National Bank $14.2 million
· Integra $895,000
In an unrelated Chapter 11 bankruptcy petition, a number of Pearlman’s downtown properties moved closer toward the auction block.
]]> Involuntary BankruptcyThe Process:
When a creditor files a petition for involuntary bankruptcy, the debtor can file objections for up to 20 days. A trial would then take place. If the debtor does not file objections, the bankruptcy will usually go forward.
An involuntary bankruptcy petition filed under Chapter 11—lets the debtor stay in business while developing a reorganization plan. The creditors are then repaid their debt from the business’s cash flow. Chapter 7, however, forces a liquidation of the debtor’s assets. Only creditors whose claims have been approved by the bankruptcy court are paid from the debtor’s estate.
Sagaria Law, P.C. represents clients in Santa Clara County, Alameda County, and Monterey County (including the cities of San Jose, Cupertino, Oakland, Berkeley, and Carmel), who wish to seek bankruptcy protection under Chapter 7, Chapter 11, and Chapter 13 of the U.S. bankruptcy code. Contact Sagaria Law, P.C. to speak with one of our attorneys for your free consultation.
4 creditors hit Pearlman with bankruptcy petition, Orlando Sentinel.com, March 3, 2007
Related Web Resources:
Involuntary Bankruptcy, CPA Finder
]]>Lawyers for the plaintiffs rejected the diocese’s “final and best” settlement offer on Tuesday. An attorney for the diocese said the rejection left the diocese “with no choice.” Meanwhile, attorneys for the plaintiffs called the settlement amount insufficient. They are also accusing the diocese of filing for bankruptcy to keep potentially embarrassing details private.
Bishop Robert H. Brom says the diocese decided to file for bankruptcy because any damage awards from earlier trials could drain “diocesan and insurance resources,” which could result in no funds being left for other victims.
The San Diego diocese becomes the fifth diocese in the United States to file for bankruptcy protection.
Timeline: US Catholic sex scandal (BBC.com):
1984: Bernard Law is appointed archbishop of Boston, and elevated to cardinal a year later.
1985: Sex abuse by priests becomes a national issue in the US for the first time, as Louisiana priest Gilbert Gauthe pleads guilty to 11 counts of molestation of boys.
1992-3: The Reverend James Porter of Fall River diocese, Massachusetts, is accused of abusing children in five US states in the 1960s and 1970s. He later pleads guilty to 41 counts of abuse.
1992: US bishops meeting in South Bend, Indiana, admit attempts by some of their number to hide abuse.
1993: First legal proceedings brought against Dallas diocese over sex abuse by the priest Rudolph Kos.
13 July, 1998: Dallas diocese forced to pay more than $31m to victims of Kos.
1999: Former Massachusetts priest John Geoghan indicted on child rape charges.
8 January, 2002: Vatican publishes guidelines on how to deal with pedophile priests, saying all cases should be reported to Rome.
Geoghan was jailed for 10 years in 2002 - and later killed in prison
9 January: Cardinal Law apologizes to victims of John Geoghan and promises a tougher line on abusive priests in future.
18 January: Geoghan convicted of indecent assault and battery of a 10-year-old boy, for which he later receives a 10-year prison sentence.
4 April: Two US men, in Florida and Oregon, begin legal action which symbolically names the Vatican for its alleged role in covering up sex abuse cases.
8 April: File released on the Rev Paul Shanley, alleging he publicly advocated sex between men and boys and still received the backing of the archdiocese for his ministry.
23 April: Pope John Paul II calls emergency meeting with US cardinals in Rome.
2 May: Paul Shanley arrested in California and later charged on three counts of child rape. He denies the charges.
13 June: US bishops approve "zero tolerance" national policy on abuse, but the Vatican demands changes to protect rights of priests.
17 September: Boston Jesuit priest James Talbot charged with raping and assaulting three teenaged students.
19 September: The Boston Archdiocese reaches $10m settlement with victims of John Geoghan, retracting a previous settlement of $30m, which the Church said would have bankrupted the archdiocese.
Shanley was convicted of raping at least one boy.
3 November: Cardinal Law apologizes for "decisions which led to suffering".
13 November: US bishops meet in Washington and approve revised policy on abusive priests, which takes account of Vatican concerns.
On the same day, Roman Catholic activists from the Survivors First group launch an online database listing 573 US priests accused of involvement in pedophilia since 1996, later dropping 100 of the names.
3 December: New revelations about eight priests in Boston archdiocese accused of abusing women and girls, taking drugs and supplying drugs in return for sexual favors.
6 December: Cardinal Law leaves for the Vatican, on the same day that he reportedly is ordered to appear before a grand jury investigating sex abuse allegations.
13 December: Cardinal Law resigns as archbishop.
The Vatican has demanded some protection for accused priests
April 2003: The Boston Archdiocese avoids bankruptcy by agreeing to sell land and buildings for over $100m to fund legal settlements to more than 500 abuse victims.
24 August: John Geoghan is killed in a Massachusetts prison.
27 February 2004: A report commissioned by the Church says more than 4,000 US Roman Catholic priests had faced sexual abuse allegations in the last 50 years, in cases involving more than 10,000 children - mostly boys.
1 July: The key accuser of defrocked priest Paul Shanley is dropped from the case by prosecutors.
7 July: In an unprecedented move, the Portland Archdiocese files for bankruptcy because of the huge costs from clergy sex abuse lawsuits.
The action halts a trial of a lawsuit seeking some $155m against the late Rev Maurice Grammond, who was accused of molesting more than 50 boys in the 1980s.
28 September: Prosecutors drop a case against former Massachusetts bishop Thomas Dupre, hours after he is charged with raping two children in the 1970s.
15 November: US Roman Catholic bishops elect Bishop William Skylstad as their new president. His Washington diocese faces bankruptcy due to the volume of compensation claims made by alleged victims of child abuse.
3 December: After two years of talks, the diocese of Orange County, California, settles a sex abuse lawsuit brought by 87 plaintiffs for an unspecified sum. The diocese later says the package is worth $100m (£53m).
7 February: A US court convicts Paul Shanley of four charges relating to offences committed in the 1980s including rape and indecent assault.
At Sagaria Law, P.C., we can help you file for bankruptcy protection. We represent clients in Chapter 13, Chapter 11, and Chapter 13 bankruptcy proceedings. Many of our clients are individuals and businesses based in Monterey County, Alameda County, and Santa Clara Count within the cities of San Jose, Fremont, Oakland, Cupertino, Morgan Hill, Carmel, and Los Gatos, as well as other cities in the area. To schedule your free consultation, contact Sagaria Law, P.C. today.
San Diego Diocese Files For Bankruptcy, The Sentinel Online, February 28, 2007
Timeline: U.S. Catholic Sex Scandal, BBC News, February 7, 2005
Related Web Resource:
Chapter 11: Bankruptcy Basics, U.S. Courts.gov
]]>James River had set up Crown as a subsidiary in the transaction, which then left Crown with hundreds of millions of dollars in underperforming assets and debts. James then spun off Crown into a separate company.
According to Crown Paper Liquidating Trust, Crown’s bankruptcy trustee, the accounting firms and investment banks made false representations when they said that Crown “would be solvent and viable” after the transaction. In making these false representations, Crown Paper Liquidating Trust says, the investment banks and accounting firms helped defraud Crown Vantage’s creditors. Crown Vantage filed for bankruptcy protection five years later.
The 9th Circuit Court of Appeals and a district court agreed with the defendants and dismissed the case. The appeals court also said that lawsuits to recover damages should be brought by creditors and not the trustee.
A court filing by the trust says JP Morgan Chase and Co., in representing other creditors and itself, would receive half of any damages recovered.
What Is A Trustee?
In every bankruptcy case, the courts appoint an impartial trusted to act as the creditors’ representative. A trustee’s role will vary depending on each case and the kind of bankruptcy petition that has been filed.
In general, however, a bankruptcy trustee's role includes:
· Keeping financial records
· Making sure that fiduciary duties are executed and standards upheld
In Chapter 11 proceedings, a trustee’s responsibilities can include establishing official committees for a specific case, reviewing the bankruptcy reorganization plan to make sure information is accurate and adequate, monitoring deadlines to make sure they are met, and investigating any allegations of abusive conduct or fraud.
At Sagaria Law, P.C., our attorneys skillfully represent individuals and companies in Chapter 7, Chapter 11, and Chapter 13 bankruptcy cases, as well as in any matters that may arise as a result. Many of our clients reside in cities throughout Monterey County, Alameda County, and Santa Clara County, including the cities of Campbell, San Jose, Cupertino, Dublin, Emeryville, Fremont, Monterey, Santa Clara, and Carmel. To schedule a free consultation with one of our attorneys, contact Sagaria Law, P.C. today.
Supreme Court Turns Down Bankruptcy Case, Chron.com, February 26, 2007
Who is a Trustee, Bankruptcyhome.com
Related Web Resource:
Title 11 Bankruptcy, U.S. Code Collection, Cornell Law School
U.S. Trustee Program, Department of Justice
]]>Recent reports indicate that Yandell accrued more debt than the board had been aware of and without its authority or approval. The town's debts include a number of credit purchases, including more than $4,900 in Lowe’s Commercial Services, $95, 208 for two vehicles, and over $3,200 in Dell Computers. Collection agencies are also owed money by Moffett, including $16,183.18 to AWA Collections.
An audit of the Moffett Police Department may have contributed to the town's lack of funds. It was discovered that more than half of the department's operating budget in 2003 and 2004 came from traffic tickets. The Oklahoma Department of Public Safety has indefinitely banned Moffett Police from engaging in any traffic enforcement over a four-mile strip on U.S. Highway 64.
The town filed their bankruptcy petition on December 20, 2006, and creditors are currently prevented from collecting debts owed by the town. According to court filings, Moffett has $199,396.28 in liabilities and $43,033 in assets.
]]> Chapter 9 Bankruptcy, also called municipality bankruptcy, offers protection to a municipality in financial trouble while it reorganizes itself and figures out a plan to pay back creditors. Unlike other forms of bankruptcy, Chapter 9 does not allow for the liquidation of assets so the proceeds can be paid to creditors. Often, debts are reorganized by reducing the interest or principal owed, extending debt maturities, or refinancing.Only municipalities are eligible to file for Chapter 9 relief, which can include, counties, cities, school districts, public improvement districts, townships, and revenue-producing bodies that offers services which are funded by users, including highway authorities, gas authorities, and bridge authorities.
Upon filing for Chapter 9 bankruptcy, an automatic stay ceases all collection actions against the debtor and its property. An additional provision of Chapter 9 expands the stay to include entities other than debtors, such as inhabitants of the debtor and officers of the debtor.
At Sagaria Law, P.C., we can help you file for bankruptcy petition. Many of our clients have successfully sought bankruptcy protection under Chapter 7, Chapter 11, and Chapter 13 of the U.S. bankruptcy code. We have also helped individuals and businesses successfully emerge from bankruptcy protection.
Sagaria Law, P.C. represent clients throughout Santa Clara County, Monterey County, and Alameda County, including the cities of Gilroy, San Jose, Fremont, Foster City, Carmel, Pacific Grove, Oakland, and Los Altos. Contact Sagaria Law, P.C. today to schedule your free consultation.
Debt incurred by former mayor prompted bankruptcy, Sequoyah County Times, February 7, 2007
Municipality Bankruptcy, U.S. Courts.gov
Related Web Resource:
Moffett Files Bankruptcy, Sequoyah County Times, January 31, 2007
Justice John Paul Stevens, in writing for the majority, stated that while honest debtors were entitled to convert their Chapter 7 cases to Chapter 13, a court is entitled to take away that right because of “fraudulent conduct.” Justice Samuel A. Alito, Jr. in his dissent, however, said that the U.S. bankruptcy code was unambiguous in its provision and that the debtor possesses a “broad right” to make the conversion to Chapter 13. Previous to the Supreme Court ruling, a bankruptcy judge had denied Marrama's request to convert to Chapter 13, with a bankruptcy appellate court supporting the ruling.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy, also called liquidation bankruptcy, allows a debtor to have his or her debts become liquidated. Essentially, a bankruptcy discharge under Chapter 7 frees the debtor from being personally liable for discharged debts while preventing creditors from collecting payments or taking other action against the debtor, such as eviction, foreclosure, or shutting down utilities. A court-appointed bankruptcy trustee then liquidates certain assets owned by the debtor.
In order to qualify for personal bankruptcy under the Chapter 7 bankruptcy code, a debtor must pass the means test- meaning that their current income must be less than or equal to the median in their state. If a debtor does not pass the means test, he or she may have to file under Chapter 13 bankruptcy instead.
]]> Chapter 13 BankruptcyDebts that must be paid back include:
-Income owed to employers.
-Any taxes owed.
-Child support.
-Alimony.
-Mortgage payments.
-Car payments.
A person who files for Chapter 13 cannot have secured debts larger than $922,975 and unsecured debts bigger than $307, 675. To qualify for Chapter 13, your income must be above a certain minimum.
If you live in Monterey County, Alameda County, or Santa Clara County and you would like to file for Chapter 13 or Chapter 7 bankruptcy, please contact Sagaria Law, P.C. We handle bankruptcy filings for many individuals and businesses in need of this protection. Many of our bankruptcy clients are from the Northern California cities of San Jose, Emeryville, Saratoga, Carmel, Foster City, Menlo Park, Berkeley, and Cupertino. Contact Sagaria Law, P.C. today.
High Court Rules Against Businessman In Bankruptcy Case, Washington Post, February 22, 2007
Related Web Resource:
Chapter 7 Bankruptcy Resource Center, Nolo
Chapter 13 Bankruptcy, Personal Bankruptcy Information
]]>According to a letter by Bishop Robert Brom to parishioners, the bishop said that Chapter 11 could be the only option if the abuse victims could not be fairly compensated without "jeopardizing our overall mission…” he also expressed concern for the “betrayal of trust” experienced by the victims and begged for their forgiveness. He is expected to provide more extensive detail regarding his announcement later this week.
A lawyer for a number of the San Diego plaintiffs, however, says that the diocese has more than enough insurance and assets to settle the claims of clergy abuse. He also claims that the bankruptcy alternative would be one done in bad faith—not because the diocese is insolvent, but because the filing would automatically stay the upcoming trials.
The first case against the San Diego diocese that will go on trial—scheduled for the end of this month—was brought by a Colorado woman who is accusing Reverend Patrick O’Keeffe of persuading her to have sex with him at his parish office when she was just 17 in 1972. Three more trials involving multiple victims who claim that the priests who abused them were moved by diocese officials to different parishes in order to avoid the abuse incidents being exposed to the public are pending.
]]> Although clergy abuse allegations against the San Diego diocese go back decades, the majority of the 150 lawsuits were filed in 2003 following California’s decision to lift, for one year, the statute of limitations for allowing clergy abuse cases to be filed. 30 other individuals who have filed claims against the San Diego diocese for sex abuse allegations have reached financial settlements. The San Diego diocese is comprised of one million Catholic members in Imperial County and San Diego.If the Roman Catholic Diocese of San Diego were to file for bankruptcy protection, it would be the fifth of the 196 dioceses facing clergy sex abuse allegations to do so. Other dioceses that have filed for bankruptcy include the Roman Catholic Diocese of Tucson, the Archdiocese of Portland, the Roman Catholic Diocese of Davenport, and The Catholic Diocese of Spokane.
The Automatic Stay
When an organization or a business files for Chapter 11 bankruptcy, they immediately receive an automatic stay, which automatically suspends all collection activities, foreclosures, repossessions of property, and judgments for a set period of time. This stay gives the debtor an opportunity to try to resolve its financial situation without having to worry about paying its debts back. A few kinds of debts, such as family support payments, criminal proceedings, and support from property that is not part of one’s estate, are exempted from an automatic stay. In certain instances, a secured creditor can ask the court to grant it's debt relief from the automatic stay.
Sagaria Law, P.C. represents clients who wish to seek bankruptcy relief under the U.S. Bankruptcy code—Chapter 7, Chapter 11, and Chapter 13, in particular. With offices conveniently located in Monterey, San Jose, and Fremont, our bankruptcy attorneys represent clients throughout Monterey County, Alameda County, and Santa Clara County, as well as individuals and businesses in San Benito County, Scotts Valley, Capitola, Watsonville, and Santa Cruz. Contact Sagaria Law, P.C. today, and your initial consultation with us is free.
Diocese of San Diego Eyeing Bankgruptcy, Sign On San Diego, February 18, 2007
Related Web Resource:
Chapter 11: Bankruptcy Basics, US Courts.gov
US Code: Title 11 Bankruptcy, Cornell Law School
Northwest is the 5th largest carrier company in the U.S. It filed for bankruptcy protection last September. A court hearing regarding its disclosure statement is scheduled for March 26.
According to Northwest’s proposed plan, holders of general unsecured claims would receive stock valued at 66% to 83% of the claims, which are estimated at anywhere from $8.75 billion to $9.5 billion. Northwest would sell new common stock worth $750 million and let unsecured creditors decide first whether they wish to buy new stock. $1.5 billion/distributions would be given to employees. Current shareholders would not receive any distribution, and current shares would be cancelled.
Chapter 11 bankruptcy
Even when a company manages to successfully exit bankruptcy, the bondholders and creditors usually become the new owners and existing equity shares are usually cancelled.
To find out more information about the stocks of a company that is under bankruptcy protection, you should contact: The company’s investor relations department, the broker who sold you the stocks, the Securities and Exchange Commission, the U.S. Trustees at the Justice Department, or the bankruptcy court where the company filed for bankruptcy protection. You should also consider speaking with an experienced bankruptcy attorney who can discuss the matter with you and make sure that your rights are represented and protected.
Sagaria Law, P.C. represents clients in the cities of Berkeley, Sunnyvale, Burlingame, Carmel, Cupertino, and Los Gatos, as well as clients in other cities located in Monterey County, Alameda County, and Santa Clara County. We handle Chapter 13, Chapter, 11, and Chapter 7 bankruptcy claims, as well as other bankruptcy-related matters. Contact Sagaria Law, P.C. today to schedule your free consultation.
Northwest Airlines details reorganization plan, Reuters, February 15, 2007
Corporate Bankruptcy, SEC.gov
Related Web Resource:
Northwest Airlines Corporate Information
US Trustee Program, Department of Justice
Bartels has now admitted to withholding the information from the trustee on purpose. She says that she knew that she needed to disclose information about any inheritances she had received within the six months of filing for bankruptcy. She is being ordered to pay $40,497 in restitution and serve three years of supervised release after she serves her prison term.
The United States Department of Justice says that 10% of all bankruptcy petitions have some element of fraud. When filing for bankruptcy, all debtors are supposed to fully disclose all assets and liabilities. Unfortunately, however, not everyone does this, and the concealment of assets or lying during a bankruptcy proceeding is a cause of most bankruptcy fraud cases. When a debtor does not list all of his or her assets on a bankruptcy schedule, the crimes of false statement and concealment are committed.
]]> Some Examples of Concealment:· Assets are listed but undervalued
· Certain assets are not listed, such as real estate, jewelry, recovery awards from lawsuits, inheritance
· Transferring ones assets before filing for bankruptcy
Common signs of Bankruptcy Fraud:
· Claiming theft before filing for bankruptcy
· Not being able to account for certain accounts or properties
· Incomplete schedules
· Unexplained changes in a person’s financial situation
· Tax returns not filed
· Confusion about assets or finances
Sagaria Law, P.C. represents clients in Northern California who wish to file for bankruptcy, including Chapter 7, Chapter 11, and Chapter 13 bankruptcy filings. To schedule a free consultation with one of our attorneys, contact Sagaria Law, P.C. today. We represent clients throughout Santa Clara County, Monterey County, and Alameda County, including the cities of San Jose, Fremont, Campbell, Los Gatos, Oakland, and Burlingame.
Woman gets prison for fraud in bankruptcy, Rockford Register Star, February 10, 2007
Identifying Bankruptcy Fraud (PDF)
Related Web Resource:
Bankruptcy Fraud, Cornell Law School
According to attorneys for the Atlanta-based company, all formal, informal, unfiled, and filed objections had been resolved. Among the objections, were filings from Travelocity, several banks, the city of Los Angeles, and the county and city of Denver.
Delta first filed its disclosure statement and reorganization plan last December. Since then it has made two amendments. It has also managed a takeover bid by US Airways Group, which withdrew its bid for Delta last month after Delta’s creditors announced that it would support Delta’s plan to emerge from bankruptcy as a solo company.
Creditors can vote on the reorganization plan until April 9. The plan also includes Delta’s plans to give creditors new stock upon its exit from Chapter 11.
]]> At least 50% of the carriers, lenders, suppliers, and unsecured creditors must support the plan. Votes representing a minimum of 2/3rds of the dollar value of claims must also be garnered by Delta for its plan. The stocks held by Delta’s current shareholders—who won’t get to vote on the plan—will lose their value completely.The IRS offers valuable information regarding reorganization plans and the Chapter 11 bankruptcy process on its website, including the following:
5.17.10.9 (10-31-2000)
Plans in Chapter 11
Confirming a workable Plan for the debtor’s reorganization is the ideal procedural goal of a successful Chapter 11 case. The Bankruptcy Code does prescribe certain minimal requirements for the structure of and for confirmation of a Chapter 11 Plan, but the ultimate form of a Chapter 11 Plan in a particular case is ordinarily a matter for intense negotiations between a debtor, its significant creditors, and other interested parties (e.g., the debtor’s stockholders)…
5.17.10.9.1 (10-31-2000)
Classification in Chapter 11 Plans
For the purpose of determining the treatment of creditors in a Chapter 11 Plan, the Bankruptcy Code generally requires that claims be "classified" (placed in Class 1, Class 2, etc.) based on the nature of the claims. B.C. § 1123(a)(1). Claims or interests may be included in a particular class only if such claims or interests are substantially similar to the others in that class. B.C. § 1122(a).
In practice, each secured claim is commonly placed in its own class or subclass, due to a secured creditor’s often unique interest in certain property of the debtor’s bankruptcy estate, based upon the extent and priority of the creditor’s lien or the specific mutual debt subject to offset.
5.17.10.9.2 (10-31-2000)
Other General Provisions of a Chapter 11 Plan
A Chapter 11 Plan must specify any class of claims or interests that is not impaired under the Plan. B.C. § 1123(a)(2).
A class of claim or interest holders is impaired by a Chapter 11 Plan unless the Plan leaves the claim or interest holders’ non-bankruptcy legal, equitable, and contractual rights unaltered. B.C. § 1124(1).
A Chapter 11 Plan must provide the same treatment for each claim or interest in a particular class, unless the holder of a particular claim or interest agrees to a less favorable treatment of the holder’s particular claim or interest. B.C. § 1123(a)(4). This is one reason why general unsecured creditors may be placed in several different classes in a complex Chapter 11 case.
A Chapter 11 Plan must also provide adequate means for the implementation of the Plan. B.C. § 1123(a)(5).
Unless the Plan provides otherwise, all of the property of the bankruptcy estate will, by default, revest in the debtor after the Plan is confirmed and becomes effective. B.C. § 1141(b).
I5.17.10.9.3 (10-31-2000)
Acceptance and Voting on a Chapter 11 Plan
In Chapter 11 cases, most of a debtor’s creditors and interest holders may "vote" to accept or reject a proposed Plan, as well as file an objection to the proposed Plan. In the Bankruptcy Code, voting on acceptance or rejection of a Plan only occurs in Chapter 11 cases.
Holders of administrative expense claims, gap period claims, and priority tax claims should not be classified by a Chapter 11 Plan, so the IRS ordinarily may not vote with respect to these types of claims….
Sagaria Law, P.C. represents clients in bankruptcy cases throughout Monterey County, Santa Clara County, and Alameda County. We represent clients in Chapter 7, Chapter 11, and Chapter 13 filings. Many of our clients are individuals and businesses from the cities of San Jose, Fremont, Foster City, Carmel, Sunnyvale, and Oakland. To schedule your free consultation, contact Sagaria Law, P.C. today.
Delta Moves Forward With Plan to Exit Bankruptcy, CNBC.com, February 7, 2007
Delta's Bankruptcy Exit Plan Clears Hurdle, AMT Online.com, Feb 8, 2007
Chapter 11 Bankruptcy, IRS.gov
Related Web Resource:
US Code: Title 11 Bankruptcy, Cornell Law School
]]>Milwitt published a deceptive ad in a phone book, saying that he was with a company named “AP Assistance.” The advertisement attracted the attention of a number of tenants who needed help to defend themselves from unlawful detainer actions. According to witnesses, Milwitt convinced the tenants that he was a lawyer—even though he had never gone to law school—and he told the renters that they were legally allowed to withhold their rent from the landlords. The tenants paid him fees, in exchange for him appearing in court on their behalf. Milwitt would then list them in court documents has having appeared in pro per. He did not represent any of them in court, which led to default judgments in favor of the landlords. Milwhitt had given a mailbox at a public mail service as an address, and this made it impossible for the tenants to immediately find out that he had not appeared in court for them. He filed for Chapter 13 bankruptcy protection for six of the renters—all of them claim that they did not know or even authorize the petitions, which named the six tenants’ landlords as creditors. Because of the petitions, automatic stays were immediately enacted. This prevented the landlords from collecting the rent owed to them.
Milwhitt, Under 18 U.S.C. Sec 157, was indicted on six counts of bankruptcy fraud. According to the indictment, "he fraudulently obstructed the creditors’ legal right to collect back rents, and repossess the properties” by filing the fake petitions. He was found guilty of five of those counts by a jury.
The Ninth Circuit overturned the conviction, saying that the specific intent to defraud the victim or victims—in this case, the landlords—was not identifiable.
]]> 879 Bankruptcy Fraud -- 18 U.S.C. § 157Title 18 U.S.C. § 157 prohibits devising or intending to devise a scheme or artifice to defraud and, for purposes of executing or concealing the scheme either (1) filing a bankruptcy petition; (2) filing a document in a bankruptcy proceeding; or (3) making a false statement, claim, or promise (a) in relationship to a bankruptcy proceeding either before or after the filing of the petition; or (b) in relation to a proceeding falsely asserted to be pending under the Bankruptcy Code. This section, which is patterned after the mail and wire fraud statutes, was added by the Bankruptcy Reform Act of 1994. This statute applies to any bankruptcy fraud scheme that continues or begins after October 22, 1994--the effective date of the Bankruptcy Reform Act of 1994.
Section 157 provides:
A person who, having devised or intending to devise a scheme or artifice to defraud and for the purpose of executing or concealing such a scheme or artifice or attempting to do so--
· files a petition under title 11;
· files a document in a proceeding under title 11; or
· makes a false or fraudulent representation, claim, or promise concerning or in relation to a proceeding under title 11, at any time before or after the filing of the petition, or in relation to a proceeding falsely asserted to be pending under such title, shall be fined under this title, imprisoned not more than 5 years, or both.
Any defendant who undertakes a fraud scheme against anyone and then carries out or conceals the scheme by filing for bankruptcy or by filing any documents in the bankruptcy, violates this statute. This section is also applicable to the defendant who tries to defraud someone by falsely asserting that a case is in bankruptcy in order to forestall the victim's actions. The essence of this statute is the existence of a fraud scheme or attempted fraud scheme and any use of the bankruptcy system to carry out the scheme. For example, this statute should be applicable to petition mills that are set up to defraud the landlord of a few months rent, or to a bust out scheme. Likewise, a defendant who is actively defrauding anyone violates this statute by filing bankruptcy to delay or conceal the fraud. Case law from the wire, bank, and mail fraud statutes, 18 U.S.C. §§ 1341, 1343, and 1344, which have similar language, will be very useful in determining the scope of this statute.
Sagaria Law, P.C. represents clients in Monterey County, Alameda County, and Santa Clara County, including the cities of San Jose, Fremont, Sunnyvale, Berkeley, Pacific Grove, and Pebble Beach, in the areas of Chapter 7 bankruptcy, bankruptcy Chapter 11 bankruptcy, and Chapter 13 bankruptcy. To schedule your free consultation, contact Sagaria Law, P.C. today.
Ninth Circuit Reverses Bankruptcy Fraud Conviction of Phony Attorney, Metropolitan-News Enterprise, February 6, 2007
Title 9 Criminal Resource Manual, US Doj.gov
Related Web Resource:
Chapter 13 Bankruptcy Basics, US Courts.gov
The announcement comes as the country’s third-largest carrier company amended and made technical changes to its bankruptcy reorganization plan and follows the withdrawal of its hostile takeover bid (at least $9.8 billion) by US Airways.
Delta’s board had considered US Airways’s proposal several times but did not take any action beyond that. US Airways withdrew its bid after the unsecured creditors rejected the merger offer in favor of supporting Delta’s reorganization plan. The Arizona-based U.S. Airways Group had given the committee until February 1 to meet certain demands, including postponing Delta’s disclosure statement hearing that was scheduled on February 7, or it would pull its offer.
Also, because several creditors had objections with its disclosure statement, Delta is working with them to resolve those differences. The airline carrier wants its reorganization plan confirmed in April.
]]> According to Doug Parker, US Airways chairman and chief executive officer, "Our proposal would have provided substantially more value to Delta's unsecured creditors than the Delta stand-alone plan. We would have created a better and more financially stable airline that offered more choice to consumers and increased job security to its employees."Ever since US Airways's initial bid, Delta has refused to change its plans to emerge from Chapter 11 protection as a standalone company, saying that US Airways has "ignored major negative synergies that previous transactions have proven will occur," including a $23 billion total debt that would be accrued if the two companies came together. Delta says that when it emerges as a standalone company, its total debt will only be $10 billion.
Earlier this week, six financial institutions made a commitment to provide Delta with a total of $2.5 billion in exit financing.
Our attorneys at Sagaria Law P.C. represent clients in Monterey County, Santa Clara County, and Alameda County who wish to file for bankruptcy protection under Chapter 7 bankruptcy, Chapter 11 bankruptcy, or Chapter 13 bankruptcy. Our offices are located in San Jose, Fremont, and Monterey, and our clients come from Santa Clara, Palo Alto, Oakland, Berkeley, Foster City, as well as other cities in the surrounding areas. Contact Sagaria Law, P.C. to schedule your free consultation.
Delta's Creditors Approve $2.5 Billion Financing Plan, CNBC.com, February 2, 2007
U.S. Airways Pulls Delta Bid, Tampa Bay Business Journal, February 1, 2007
Related Web Resource:
U.S. Airways Withdraws Offer for Delta Airlines, US Airways
Delta Air Lines Secures $2.5 Billion Exit Financing, Delta Air Lines
]]>A hearing is scheduled today for a federal bankruptcy judge to hear AMS’s proposal for how it will develop a plan to sell, partially sell, or refinance the business. The California-based company says it has formed confidentiality agreements with potential buyers and investors. It wants a bankruptcy judge to grant it permission to sell Publishers Group West, one of its subsidiaries, to publishing and distribution company Perseus Books.
While AMS’s creditors support the sale of Publishers Group West, they believe that the debtor is insolvent and should stop spending money by shutting down its operations. Last week, a committee of AMS’s unsecured creditors filed objections to the company’s proposal, which they are convinced will fail. Penguin Books and Random House are members of the committee.
“Because AMS's business has crumbled, AMS is no longer a viable business entity, and it should quickly ratchet back the scope of the operations and expenses and transition into a liquidation mode,” said a committee member.
]]> AMS owes the top 40 book publishers over $220 million. This amount does not include other debts owed by the company. The publishers have attempted to get back their unsold inventory from AMS, but a bankruptcy judge has said that the banks the company owes money to must first be paid from AMS’s inventory proceeds before any inventory can be returned.AMS’s attorney, however, says the creditors have made the company’s problems worse by making warehouse store deals with other book distribution companies and cutting off book shipments.
Problems first arose for AMS in 2003, when three former executives pleaded guilty to criminal charges for not telling retailers when they were due credits for promotional and advertising services that the company was unable to fully deliver.
Since 2005, AMS has been looking to either find more financing or sell its assets. It currently employs over 800 workers throughout the U.S. AMS’s creditors say that business has gone down since the company filed for Chapter 11 protection in December.
From Chapter 11 To Chapter 7 Bankruptcy
When a company discovers that it cannot pay creditors, it may decide to file for bankruptcy. A company that files for Chapter 11 bankruptcy makes a commitment to stay in operation while it figures out a reorganization plan to pay back its debts. A bankruptcy court may grant a complete or partial relief from the company’s contracts and debts so the company can get back on its feet. If a company’s debts are larger than its assets, its stockholders (owners) may end up with nothing, while the creditors may become owners in the reorganized company. Unless the creditors go through the bankruptcy court, they cannot collect on debts from a company while the company is under bankruptcy protection. If creditors do not believe that reorganization will allow a company to pay back its debts, they may petition the bankruptcy court to convert the company’s case from Chapter 11 to Chapter 7 “liquidation” bankruptcy. This type of bankruptcy mandates that a company shut down its operations and sell its assets to pay back creditors.
Sagaria Law P.C. is located in Monterey, Fremont, and San Jose. Our attorneys represent clients in Chapter 7, Chapter 11, and Chapter 13 bankruptcy filings. Many of our clients come from the cities of Burlingame, Santa Clara, Cupertino, and Oakland. To schedule a free consultation, contact Sagaria Law, P.C. today.
AMS creditors petition judge for liquidation, Sign On San Diego, January 27, 2007
Chapter 11 Bankruptcy Law Information, Zeromillion.com,
Related Web Resources:
]]>In a written statement submitted yesterday, the creditors said that the US Airways offer of cash and stock offers a "superior recovery for creditors compared to what they would receive under Delta's standalone Chapter 11 plan." The creditors group is made up of creditors holding approximately $2.4 billion in claims. Previously, the creditors had asked Delta to consider the U.S. Airways offer. Now, they want the official creditors committee to ask Delta to look at the offer.
According to Anne Granfield, a spokeswoman for the ad hoc committee, "As it stands, unless the official committee comes out and says something, creditors won't have a choice."
According to Granfield, US Airways says it will increase its bid amount for Delta as long as the creditors are able to postpone the hearing. US Airways, however, says it has not offered to increase its offer, which will expire on February 1. But the carrier does say that it will withdraw its bid if Delta’s reorganization hearing isn’t postponed by Thursday. US Airways had attempted a hostile takeover to purchase Delta last November.
Delta estimates that its value will be somewhere between $9.4 billion and $12 billion if it exits from Chapter 11 bankruptcy by the middle of the year as a standalone company. Once its disclosure statement, which it submitted in December, is approved, the carrier company can begin soliciting votes to get its reorganization plan approved.
]]> Subchapter 1102 in Chapter 11 of the U.S. Bankruptcy Code offers information about the Creditors’ committee:
§ 1102. Creditors’ and equity security holders’ committees
(a)
(1) Except as provided in paragraph (3), as soon as practicable after the order for relief under chapter 11 of this title, the United States trustee shall appoint a committee of creditors holding unsecured claims and may appoint additional committees of creditors or of equity security holders as the United States trustee deems appropriate.
(2) On request of a party in interest, the court may order the appointment of additional committees of creditors or of equity security holders if necessary to assure adequate representation of creditors or of equity security holders. The United States trustee shall appoint any such committee.
(3) On request of a party in interest in a case in which the debtor is a small business and for cause, the court may order that a committee of creditors not be appointed.
(b)
(1) A committee of creditors appointed under subsection (a) of this section shall ordinarily consist of the persons, willing to serve, that hold the seven largest claims against the debtor of the kinds represented on such committee, or of the members of a committee organized by creditors before the commencement of the case under this chapter, if such committee was fairly chosen and is representative of the different kinds of claims to be represented.
(2) A committee of equity security holders appointed under subsection (a)(2) of this section shall ordinarily consist of the persons, willing to serve, that hold the seven largest amounts of equity securities of the debtor of the kinds represented on such committee.
Sagaria Law, P.C. represents clients in Chapter 7, Chapter 11, and Chapter 13 bankruptcy claims. Many of our bankruptcy clients are businesses and individuals from the cities of Berkeley, Alameda, Foster City, Palo Alto, and San Jose, as well as other cities in Monterey County, Alameda County, and Santa Clara County. To schedule your free consultation, contact Sagaria Law, P.C. today.
Delta creditors want bankruptcy hearing postponed, WNC.com, January 30, 2007
Chapter 11, US Code Collection, Cornell Law School
Related Web Resources:
Corporate Bankruptcy, SEC.gov
LA also says that Delta’s reorganization plan improperly gives the airline company broad discretion to defer its decisions when it comes to rejecting or assuming certain unexpired leases beyond the effective plan date.
The airline company, which filed for Chapter 11 bankruptcy in 2005, estimates that it will be worth $9.4 billion to $12 billion if it emerges from bankruptcy protection as planned and as a standalone company by mid-2007.
]]> Currently, however, only the disclosure statement and not the reorganization plan is at issue. A separate hearing will be held for the reorganization plan. Delta filed its disclosure statement and reorganization plan on December 19, 2006. It amended it last Friday.The IRS offers the following information regarding Disclosure Statements in Chapter 11 bankruptcy cases:
The Disclosure Statement (DS):
Chapter 11 is the only chapter of the Bankruptcy Code that requires a Disclosure Statement (DS) to accompany a proposed Plan of reorganization for the debtor.
The DS may be quite long or relatively brief, but it should generally explain what the proposed Plan means to particular creditors and to other interested parties.
The DS should provide these interested parties with enough information about the debtor and the proposed Plan so that they may decide whether to support or oppose the proposed Plan.
The precise contents of a DS are not mandated by the Bankruptcy Code, but certain topics are ordinarily discussed in a DS as a matter of common practice and in accordance with case law.
The contents of a DS are not binding on the IRS in the way that the provisions of a confirmed Plan or the confirmation order are, but the DS approval process provides the IRS with an opportunity to explore uncertain relevant facts regarding the debtor and to clarify ambiguities in a proposed Plan.
Once the DS is approved by the bankruptcy court, a proposed Plan may also move to a confirmation hearing and to confirmation in a relatively short time frame.
The Purpose and Content of a Disclosure Statement:
In a Chapter 11 case, the bankruptcy court generally must first approve a proposed DS of a Plan proponent as containing "adequate information," with notice and a hearing for interested parties, before the Plan proponent may solicit votes from interested parties for the acceptance of a proposed Plan.
Before filing a bankruptcy petition, however, a prospective Chapter 11 debtor or another party may circulate a proposed bankruptcy Plan and DS for tentative approval by other interested parties, as often happens when a business hopes to file a Prepackaged Chapter 11 Plan.
In the Chapter 11 cases of electing "small business" debtors, bankruptcy courts may also conditionally approve a DS, without first giving interested parties notice and a hearing, and then allow the Plan proponent to circulate the conditionally approved DS and proposed Plan for approval at a combined hearing on the DS and the Plan. B.C. § 1125.
The "adequate information" required for court approval of a DS means information of a kind, in sufficient detail and as far as reasonably practicable, as would enable a hypothetical reasonable holder of a claim (a creditor) or of an interest (e.g., a stockholder) to make an informed judgment about whether to accept or reject the proposed Plan. B.C. § 1125(a).
Usually, the DS will set forth the recent history of the debtor, the reasons why the debtor filed a bankruptcy petition, and the measures the debtor has undertaken to reverse its financial setbacks.
The DS should also give a brief description of the proposed Plan and the treatment to be given to the debtor’s various creditors under the proposed Plan.
Bankruptcy courts also require that a DS contain a discussion of the following matters:
-the debtor’s available assets and their value;
-claims made against the estate;
-a liquidation analysis, setting forth the estimated return that creditors would receive if the debtor was in a Chapter 7 case;
-the future management of the debtor;
-the risks being taken by creditors and interest holders under the proposed Plan;
-the existence, likelihood, and possible success of litigation involving the debtor; and
-the likely tax consequences of the proposed Plan, for the debtor and for creditors.
Our attorneys at Sagaria Law, P.C. represent clients in Alameda County, Santa Clara County, and Monterey County, including the cities of Emeryville, Los Gatos, and Carmel, in Chapter 7, Chapter 11, and Chapter 13 bankruptcy cases. Contact Sagaria Law, P.C. to schedule a free consultation. Our offices are conveniently located in Fremont, Monterey, and San Jose.
Los Angeles Objects To Delta Plan, Chron.com, January 25, 2007
Legal Reference Guide for Revenue Officers, IRS Manual
Related Web Resources:
Delta's Restructuring, Delta.com
Title 11 Bankruptcy, U.S. Code, Cornell Law School
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