Bankruptcy Indiana

The debate going on right now about Chrysler Corporation's bankruptcy is very important in a lot of ways.  While my own bankruptcy law practice has always focused on personal bankruptcy and small business bankruptcy and not mega-corporations, there are quite a number of things about the Chrysler situation that can help my blog readers better understand how the bankruptcy process actually works.

Needless to say, there are many jobs at stake, with car dealerships and machine shops and auto parts makers downsizing or closing because of Chrysler's problems.  I've written many times about how crucial it is to have well-paid jobs available as my Indiana clients emerge from bankruptcy and begin to rebuild their financial lives. Similarly, the faster Chrysler can emerge from bankruptcy, whether through a merger or sale, the greater hope there is of fewer jobs being sacrificed.

The type of bankruptcy Chrysler filed is Chapter 11, which is a "reorganization of debt". If individuals or companies have more than a certain amount of debt, this is the type of bankruptcy that has to be filed. Most individuals don't use Chapter 11, because it is much more expensive, time-consuming, and difficult than a Chapter 7 or a Chapter 13 bankruptcy. 

I'm always reminding readers that the bankruptcy court process has different parties with an interest in the proceedings.  When I help an individual file bankruptcy, usually the parties are the secured creditors (the banks or companies who lent money secured by a car or a home, for example), the unsecured creditors (credit card companies or health providers, for example - there's no property securing the loan), and the debtor him/herself.  Obviously, not every party gets everything it wants, but the object of bankruptcy law is to treat all parties as fairly as possible, with the secured creditors having priority over the unsecured creditors.

That's exactly what the argument is all about with Chrysler. Italian car company Fiat has offered to buy most of Chrysler, and that would save the company from liquidation, allowing Chrysler to get back to manufacturing smaller, more fuel-efficient cars. But the way in which this sale is taking place, secured creditors might not receive will not receive payment. 

As RealClearMarkets investment blog reminds us, according to bankruptcy law, lenders who have a claim on collateral, meaning secured debt, are supposed to be paid in full before anyone else gets paid.  As a bankruptcy attorney in Indiana, I'm especially interested in this case because three of the secured creditors of Chrysler Corporation are the Indiana state pension funds who invested in the bonds issued by Chrysler. As of this writing, the Indiana state Treasurer is appealing the Chrysler "cramdown" on behalf of the pension funds, but the court has turned that appeal down.

With GM also on the brink of bankruptcy, its bond holders are preparing for battle as well.
I will keep my readers posted on the news about both these giant bankruptcy cases. 

In the meanwhile, I'll continue to help my Indiana individual and small business bankruptcy clients go through the steps of the bankruptcy filing process, taking things one day at a time.