Bankruptcy Indiana

As an Indiana bankruptcy attorney, I help many small business owners through the bankruptcy process. Not one of the tens of thousands of cases I’ve handled over the years has involved a corporate national or international giant – I deal with individuals, families, and small business. Still, I’ve found, I can use information we read in the news about major companies filing and then emerging from bankruptcy as tools to clarify to my blog readers exactly how the process of bankruptcy works.  Even more important, companies in the news give me a chance to demonstrate what the reasoning is behind the bankruptcy system of law.

There are two very large companies that are being featured in recent news stories, Delphi and the Chicago Cubs.  In each case I’ve been talking about financial developments there for months.

Auto supplier Delphi filed bankruptcy almost four years ago.  My reason for discussing this with my Indiana bankruptcy blog readers, of course, is that Delphi is – or at least was - a giant Indiana employer.  At the time, Delphi’s bankruptcy was the largest every filed in the auto industry.  (Of course, since then, we’ve had GM and Chrysler.)

Well, just two weeks ago, Delphi announced it’s completed a deal with its lenders and that it will be exiting bankruptcy.  The bankruptcy court judge approved Delphi’s plan to hand control of the company over to its lenders under the new name Delphi Holdings, a privately held Limited Liability Corporation or LLC. The company will continue to be headed by its current president and CEO out of Troy, Michigan.

I like to point out that one important purpose of the bankruptcy process is to “buy time” to continue operations while it restructures and figures out what to do next.  That’s exactly the result we’re seeing with Delphi.  Is this an ideal scenario?  Of course not – thousands of Indiana jobs were lost as a result of Delphi’s troubles.  But, due to the bankruptcy system, the company has been able to stay alive.

A second story I’ve been following is the bankruptcy of the Chicago Tribune, owner of the Chicago Cubs team.  A little less than a year ago, I commented in my blog on the Tribune’s bankruptcy filing.  Looking back a few “episodes”, the Chicago Tribune had bought the team, back in 1981, from gum and candy maker William Wrigley.  Then, in 2007, the Tribune wanted to sell the Cubs.  But, by that time, the recession was beginning and there wasn’t enough credit available to finance the sale. Now what’s happening is that the Chicago Cubs are themselves filing bankruptcy. The purpose of this bankruptcy proceeding is to protect the new owners of the Cubs, the Ricketts family, from potential claims by the Tribune’s creditors.

What I want to stress here is that bankruptcy serves as a safety net.  Picture a circus safety net, set up to protect a falling trapeze acrobat from hitting the ground and being killed or maimed in the process.  But, does the acrobat spend the rest of his life in the net?  Of course not.  The purpose is to keep that acrobat safe long enough for him to get working again. 

In bankruptcy, the whole point is to emerge ready to get back to the business of living!