Bankruptcy Indiana

When individuals file bankruptcy, the court can decide to "discharge" some or all of their debts. 

Discharged debts are eliminated and do not ever need to be repaid.  In a Chapter 7 bankruptcy, credit card debt, medical bills, phone charges, and unsecured loans are usually eligible for a discharge.  Other types of debts are non-dischargeable, including student loans, alimony, child support, damages for injuries caused by drunk driving, and recent income tax debts are in the non-dischargeable category.

In contrast to individual bankruptcy, as I explained in my earlier blog post "Vlasic Foods In A Bankruptcy Pickle", in a business bankruptcy, the court does not have the power to discharge debts.  Instead, all available company assets are sold to satisfy creditors. That's because the underlying principle in a personal bankruptcy is to offer people a fresh financial start.  In a business bankruptcy, the purpose is to help the company fairly repay its creditors, or to buy time for it to find a buyer for the company.  As an Indiana bankruptcy attorney for so many years, I have helped tens of thousands of individuals file either Chapter 7 bankruptcy or Chapter 13 bankruptcy debt repayment plans.  In addition, I've helped hundreds of small businesses work through the process of auctioning assets to pay creditors, negotiating with buyer or merger partners, and sometimes totally dissolving the business.

It seems as if the Chrysler bankruptcy is not following any of these traditional bankruptcy patterns. First, as Spiegel Online's David Welch puts it, this "marks the first ever bankruptcy for a major U.S. car company…The company will continue to shrink in size and reduce its debt load." In a press statement, Chrysler officials remarked, "These are not normal business circumstances."

This is not "normal" bankruptcy procedure, either.  CNN Money.Com's headline ran, "Chrysler Won't Repay Bailout Money", going on to report that "An Obama administration official confirmed last week that Chrysler won't be repaying the loans, though a portion of the bridge loan may be recovered by the Treasury from the assets of Chrysler Financial, the former credit arm of the automaker which is essentially going out of business as part of the reorganization." The Canadian government has also agreed to kick in $900 million in bankruptcy financing, and it is assumed this loan will be forgiven as well.

So, even though this is a corporate bankruptcy, where the bankruptcy court does not have the power to discharge loans, it appears loans are in fact being discharged in a big way.