BankruptcyProf Blog

Chapter 11 Analysis from Profs Warren and Westbrook

This article, "Chapter 11: Conventional Wisdom and Reality," with more mind-boggling data, is about a year old but has some really useful information on the uses and successes of "a cross-section" of chapter 11 cases.  The total assets in the cases studied range from $13 (dollars) to $19 billion.  The article can be accessed here. 

The facts that struck me are:

• 70% of the cases, where the debtor proposes a plan, result in a confirmed plan.
• 47% of all cases not "booted out" within six months result in a confirmed plan.
• 82% of small business cases which confirmed a plan did not do so within six months, i.e., the new times limits of BAPCPA create serious risk of failure where a little more time may have resulted in success.
• Chapter 11 liquidation plans are about 30% of the total plans confirmed. 
• in 62% of confirmed plans, the original owners retained an equity stake. 
• individual chapter 11s were about 11% of the total cases filed (in 2002 decreasing from 25% in 1994).
• about one-third of all chapter 11 cases result in confirmed plans, not the 15-17% touted as the conventional wisdom.
• About half of all cases that do not file a plan within six months are "booted out."  The courts do a very good job, according to the authors, of weeding out the DOA cases early.   

More on Michael Vick

From my student, Cody Brownstein: Michael Vick has apparently filed his Statement of Financial Affairs.  You can access the "Smoking Gun" article here. 

Bankruptcy Filings Central District of California

 The Central District led the nation with 47,140 filings for the 12-month period ending June 30, 2008, up 85.9% from 25,353 filings in the previous period.

 Central District outpaced the national average percentage increase in filings by 57% (85.9% vs. 28.9%) over the same period.

 Current Filings:

                         Ch 7    Ch 11 Ch 13     Total
Jan – Aug 2008   30,107   557   9,655    40,319
Jan – Aug 2007   15,816   212   4,800    20,828

 Overall, filings through August are up 93.6% district-wide when compared to the same period last year.

 The Court is averaging 1,397 filings per week over the last ten weeks, a 108.3% increase over the 671 filings averaged over the same period in 2007.

 Projected 2008 Filings:

Projection Method Projection Filings
Seasonal Average (2000-2004, 2006-2007) 59,102
2 Year Straight-line (2007-2008) 64,903
1 Year Straight-line (2008) 69,579

 The Court is projecting upwards of 69,579 filings this year, the highest pre-BAPCPA annual total since 2003, when the Court had 75,686 filings.

 In 2008, Chapter 13 filings are approximately 24% of the Courts filings, compared to 9% pre-BAPCPA.

 Pro se filings comprise slightly more than of 23% of the Courts filings in 2008, compared to the national average of 6%.

Circuit City First Day Declaration

Circuit City filed 21 "First Day Motions" yesterday with its petition.  The Declaration of Bruce Besanko, Chief Financial Officer of Circuit City can be accessed here.  The declaration is supposed to support the motions and give an overview of the case, the problems that caused the filing, and generally introduce the parties to the Court, the creditors, prospective creditors and the media.  This one is less useful than most since there is very little financial information and the rest is pretty general and a little political.  There is an interesting expose on the attempted (and apparently successful) takeover of the Board of Directors and ousting of top management in 2008. 

There is a request to approve $900 million of DIP financing as well as a strange comment that management was expecting a $75 million refund from the IRS and that somehow hurt big time when it didn't come.  I assume that amount is a couple of payrolls at most.  The declaration says:  "The Company was optimistic that if the refund arrived promptly, the refund would address immediate short-term liquidity needs and allow the Company to further investigate out-of-court restructuring alternatives.  Notwithstanding indications from the Internal Revenue Service, the Company has not yet received the refund."

These first day motions do make me wonder what army spent how long getting them altogether to file on the first day.  There have to be hundreds of man-hours of time by both the lawyers and the debtor's staff putting these together.  The paperwork for a billion dollar DIP financing transaction alone is more than my little head can comprehend.   

Circuit City Chapter 11

Circuit City filed chapter 11 in Richmond, Virginia on November 10, 2008.  You can access the petition and related here.   The disclosures estimate $3.4 billion in assets and $2.3 billion in liabilities.  Hmm?  The Company operates approximately 712 Superstores and 9 outlet stores under the Circuit City name throughout the United States and Puerto Rico.

U.S. Bankruptcy Court
Eastern District of Virginia (Richmond)
Bankruptcy Petition #: 08-35653-KRH

Assigned to: Kevin R. Huennekens Chapter 11 Voluntary Asset

Date Filed: 11/10/2008

Debtor Circuit City Stores, Inc. 9950 Mayland Drive Richmond, VA 23233 Tax id: 54-0493875	represented by	Daniel F. Blanks McGuireWoods LLP 9000 World Trade Center, 101 W. Main St. Norfolk, VA 23510 757-640-3774 Fax : 757-640-3963 Email: dblanks@mcguirewoods.com
U.S. Trustee W. Clarkson McDow, Jr. Office of the U. S. Trustee 701 E. Broad St., Suite 4304 Richmond, VA 23219 804-771-2310

Knowing When to File for Bankruptcy

This post was contributed by Kelly Kilpatrick.   She invites your feedback at kellykilpatrick24@gmail.com.  She is a graduate of the University of Houston living in Houston and a regular contributor for education and Criminal Justice sites.

Knowing When to File for Bankruptcy
Filing for bankruptcy can be a tough decision for many people, but it is sometimes a necessary step to move forward with one’s life.  Waiting to make this tough decision can only serve to exacerbate the situation, so time is of the essence.  What follows is a list of factors that may indicate that it’s time for you to take the next step and begin the process of filing for bankruptcy.

Inability to Make Timely Payments
In light of recent economic circumstances, your liquid assets may be tied up in a number of ways.  This can greatly affect your ability to pay your creditors on time.  If you are finding it difficult to make timely payments and see no end on the horizon, you may want to begin preparing for bankruptcy, rather than letting things get out of control.

Inability to Make Minimum Payments
Perhaps you are still trying to pay your creditors on time, but are unable to pay the minimum payments.  Although what you are trying to do is noble, you are still incurring interest charges and late fees for your inability to pay the minimum balance.  Speak with a qualified bankruptcy attorney and explore your options now rather than later.

Receiving Calls from Creditors at Work
Calls from creditors, whether harassing or not, can be very intrusive and counter-productive for you and your career.  If you are unable to keep the creditors at bay, you should see what can be done to help you with this matter.  Visiting a bankruptcy lawyer can benefit you in this and other situations related to your outstanding debts.

Feelings of Being Harassed
Debt collector harassment is a real thing that happens to consumers every day.  Handling debt collectors and their sometimes questionable collections practices is something that should be left to a qualified professional.  If you decide to file for bankruptcy, the calls will be handled by your attorney, who will be working for you to rectify your situation; this will leave you to be able to take care of business without the extra headaches.

On the Verge of Repossession and/or Foreclosure
If you have let things go long enough for either one of these things to happen, you certainly need to speak with a bankruptcy lawyer right away.  You have the right to retain a vehicle and a home in bankruptcy filings, and payment schedules can be arranged to prevent these devastating things from happening to you and your family.  Act now before it’s too late to recover your vehicle or home from your creditors.

Lehman Fees Could Reach $1.4 Billion per Prof. Lopucki

Enron was the biggest bankruptcy case, $757 million in professional fees, before Lehman came along.  Lynn Lopucki, UCLA Law Professor, estimates that Lehman fees could reach $1.4 billion, probably on the backs of the bondholders who stand to lose the most. 

Articles about the fee projections can be accessed here and here.