Bankruptcy Indiana

I’m always talking to my Indiana small business bankruptcy clients about large companies that filed bankruptcy. I remind my clients that the essence of business is taking risk, and, for any size company, not all risks pan out as hoped. I use examples of large corporate bankruptcies to show how the bankruptcy process “buys time” for a debtor company to restructure.

Usually I’m referring to a Chapter 11 bankruptcy, which is the type a company would choose if it expected to continue operating and to become profitable again.  In a Chapter 11, the company continues to run its day-to-day operations, but it must ask the bankruptcy court to approve any significant decisions.

When ATA Airlines filed bankruptcy, it chose Chapter 11.  But the reorganization plan wasn’t enough to save the company, so two years later, ATA had to turn to the bankruptcy court for help filing a Chapter 7 liquidation plan.

Just a few weeks ago, Republic Airlines appealed to the bankruptcy judge in charge of the Chapter 11 bankruptcy case of Frontier Airlines.  Republic wants to purchase Frontier, which has been under bankruptcy protection for more than a year.  The bankruptcy judge is taking other bids for Frontier as well. According to Frontier president and CEO Sean Menke, “This agreement represents a major milestone….to position Frontier to emerge from bankruptcy as a competitive, sustainable airline.” The proposed reorganization plan calls for Frontier’s unsecured creditors to receive $29 million in cash. Meanwhile, an even higher bid has come in from Southwest Airlines and is being considered by the bankruptcy court.

It’s so interesting – at the same time I was reading the news about the proposed Republic purchase of Frontier, Frontier was busy launching a big sale on air fares for its domestic routes. Since I use large corporate bankruptcy cases as a sort of “teaching tool” to help consumers and small business owners better understand how the process works, I might explain Chapter 11 by saying that it often means nothing more than “business as usual”!