Business Bankruptcy Law | Small Business Bankruptcy Laws

This is multiple choice…

A. The bailouts work. The banks become money making businesses again and pay back all the money the government gave them. The auto makers also start making money again and pay back all money made. President Obama has is finishing his 2nd term and the United States economy is good. Nationalized health care is in place and everyone is getting health care without long lines or tons of paperwork, as once feared. We’ve pulled out of Iraq and the country is stable, having no conflicts.

B. The bailouts seems to work at first. By the end of President Obama’s first term, the Dow Jones is near 11,000 and unemployment has stabilized at 7%. The banks and automakers are not failing, but they are only breaking even and have not paid any money back to the government. President Obama is re-elected, but soon after the country spirals into another recession after the fake-bailout induced bubble pops. The Dow slips to below 5,000, Interest rates hit Jimmy Carter numbers, and unemployment goes over 10%. Iraq is in civil war and Iran has begun to take domain in key oil rich areas.

C. The bailouts fail. GM and Ford merge, while Chrysler files Chapter 11. Two major banks fail, while two more merge to stay afloat. Unemployment hits 9% and the Dow Jones is below 7,000. President Obama, easily getting cooperation from the super majority democratic congress (Over 60 after 2010) inject 2 trillion more dollars in bailouts which keep the banks from failing, but sends the US Dollar’s value down 50%. A dollar is down only worth .35 Euro and 45 yen. President Obama is not re-elected. A true conservative is elected. Lowers taxes, cancels many government programs and economy begins to show good signs by 2016.

Now I know there are 1000 possibilities, but of these 3, which is most likely?
X…

What do you think will happen?

"The Ford Motor Company, the only Detroit automaker that has not taken federal aid or entered bankruptcy, said its market share rose to the highest level in three years. Its sales fell 24 percent from last May, the smallest year-over-year decline reported by any of the six largest automakers since October. Ford said it would increase production by 6 percent, or 52,000 vehicles, through September."
http://www.nytimes.com/2009/06/03/business/03sales.html

Do you think Ford was brilliant for NOT taking bailout money?

See page 9 of the PDF version of the bill
http://www.house.gov/apps/list/press/financialsvcs_dem/amend_001_xml.pdf

"(e) PREVENTING UNJUST ENRICHMENT–In making purchases under the authority of this Act, the Secretary shall take such steps as may be necessary to prevent unjust enrichment of financial institutions participating in a program established under this section, including by preventing a sale of a troubled asset to the Secretary AT A HIGHER PRICE THAN WHAT THE SELLER PAID TO PURCHASE THE ASSET. This subsection DOES NOT APPLY TO troubled assets acquired in a merger or acquisition , or a purchase of assets from a financial institution in conservatorship or receivership, or that has initiated bankruptcy proceedings under title 11, United States Code."

(capitalization added for emphasis)

This means, for example, that the toxic (worthless) assets formerly owned by Wachovia but now owned by Citibank as a result of Citibank’s acquisition of Wachovia can be sold by Citibank to you, the taxpayer, at full price and not at the fire sale price paid for those assets by Citibank. Citibank makes an INSTANT profit. Citibank only paid only .1 billion to acquire the banking operations of Wachovia
http://ap.google.com/article/ALeqM5jBpTstzcj2LSvdE72t247CeMqW6QD93GK7K00

and it stands to gain much more than that in instant profits because of this loophole. This is not "bailout" – this is "raiding the treasury".

Of course some may argue that if Wachovia had not required rescue, we would be purchasing the same toxic assets at full price. So what? Why should Citibank, and not the taxpayer, be the benefactor of that change in circumstances.

That loophole would allow key players like Citigroup to UNJUST ENRICHMENT by acquiring many of the smaller banks now poised for collapse. The result would be that ALL of the toxic assets held by all of those banks would be purchased by the industry at fire sale prices and sold to the taxpayers at full price – with Citibank instantly pocketing the difference.

That also means an instant profit for foreign investors of the institution making the acquisition (Chinese, Saudi, Kuwaiti wealthy business people).

Is this acceptable to you? Do you think the politicians and the media will attempt to slide this one by the people a second time?

Mr. P. I have a sinking feeling that your description "organized crime" may be the best description for the situation at hand. Provisions like this one do not find their way into legislation because of incompetence. They are placed there intentionally.
Oft Suspended. Thanks for the answer. How is it in any way penalizing the acquiring institution to allow them to offload the toxic assets on the tax payer at the same price they paid for them? The acquiring institution is already gaining by purchasing the failing institution at fire sale prices. Are you saying the taxpayer should kick in a windfall profit to induce these acquisitions?

When can I, a common person, get a bailout???? I filed for bankruptcy last year, Chapter 13. I am on this payment plan to last 4 more years until I get my discharge. Some of us are guilty for making financial mistakes as well as these big businesses that are begging for a piece of this 0 Billion bailout. I guess it will always be true that the rich get richer and us common folk don’t get a motherf*cking thing!

Is this bailout only for big business, will some of us hard working Americans get a little taste of this bailout?

I’m also sick of stimulus packages, but whatever. The first one worked so well, lets have another. I hate this concept of bailing out companies. Yeah, Yeah, I do feel sorry for employees who get retrenched. My first un-researched thought about the auto bailout is… GM and whoever else was not nimble enough to adapt should go into chapter 11. They own lots of nice buildings and stuff. Profits from the proceeds will go to pay for their existing pension/health plans, stockholders get squat, CEO’s get squat. Then car companies like Toyota or whomever else is solvent will buy their assets. The workers will get new jobs under a new label. Of course the Unions will freak out, but these companies need to adapt or die. They are leaking boats demanding tax payer dollars so they can keep leaking. There are car manufacturers which have business models that can and do make a profit. They employ lots of people. Paulson and his flip-flops make me naseous. I’m all for the little guy, in fact I am a little guy. I just despise a bail-out. It’s Darwinian. If I thought the US auto industry could adapt in time, and we could save a few little folk, I’d be very slightly okay with the concept. Government intervention is a stop gap at best. Commentary anyone?

What are your thoughts about the auto industry Bailout… do you think its necessary, good, bad for the economy? Alternatives?

I personally believe (based on the assumption of free markets) that the market determines who is to remain in the industry or what companies must go out of business… if you look at the Global economy other car manufactures do not have any of the problems that the US auto makers are facing (mostly do to union contracts, political agendas). i think that we should let them fail because they are so inefficient and any loans from the tax payers money most likely is not going to be paid back. i’m not implying to put closer to 2.5 mil people out of work (not including Other industries like steel, etc..that will suffer from the collapse.). the solution is to consolidate all 3 companies into one entity, file for chapter 11, wipe out the equity off the balance sheet, restructure the merged entity, improve product lines, stop inefficient lines and work on fuel efficient cars raise the MPG standard. Renegotiate union contracts is a must ( i don’t think that the taxpayers need to pay 95% of a union employee salary because the plants are shut down and he is NOT ACTUALLY WORKING)…. i guess i wrote too much but its frustrating to see this happen over and over again first it was banks then its autos whats for tomorrow…

I keep hearing about the outrageous bonuses, and then complaints about how these TARP banks won’t loan out the bailout money. They all ask why the banks are just "sitting" on it. Banks don’t "sit on money" anymore than required by regulation and law. Hasn’t all that TARP money been spent on covering those Credit Default Swap insurance claims? Those banks sold CDS insurance will no requirement of maintaining any potential "claim reserves". Who ever heard of a bank being "over leveraged". The foreclosures are still coming in hot and heavy. A 2nd and 3rd TARP will just be used to pay off these CDS insurance claims. Really need to let those big banks go bankrupt, and loan new TARP money to solvent regional banks throughout the country. Right now, TARP is just pouring money down a hole. Bankruptcy is the only way out of legal contractual debt.

Here’s my plan:

1. No more free bailout money for anyone. Instead, US government gives banks vouchers to loan money to private businesses. The banks must loan the taxpayers’ money within 120 days to a credit worthy (independent rating) business or they lose the voucher. The bank must have a stake in the creditworthiness and debt repayment of the commercial borrower (perhaps by withholding percentage of earned commission over time). Essentially, the banks become accountable, commission-based middlemen for government loans.

2. Government demolishes vacant homes in ‘designated’ housing crisis cities such as Stockton, Tampa, Phoenix, and Las Vegas. The HUD secretary should convene a meeting of city mayors to come up with a plan to condemn vacant homes and blighted properties, and to ratchet up building code enforcement to remove questionable vacant homes from the market.

3. Cut capital gains tax to zero until December 31, 2010. That’s right. No one pays one cent of capital gains tax on any capital gains earned from January 1, 2009 to December 31, 2010. However, short swing transactions still pay ordinary income tax rate to discourage short selling and speculation. Thereafter, phase back tax increases until they return to current capital gains tax rate of fifteen percent.

In addition, after 2010, no capital gains tax break for foreign companies and foreign entities. If you want to gamble in the U.S stock market, you have to pay the vig to Uncle Sam starting in 2011.

4. Extend unemployment insurance benefits for six months.

5. Methodical and rational troop draw down in Iraq to save US taxpayers up to billion dollars per month. Apply some of the saved money towards giant infrastructure and public works programs here in U.S.

6. Repeal the Bankruptcy Reform Act’s means test provisions. Allow Chapter 7 petitioners to discharge all debts owed to creditors, and not be forced into Chapter 13 reorganization plans.

7. Prohibit all foreign companies from bidding on government contracts until 2012.

I don’t. Buying a new car is one of the worst experiences. I bought a new Chevrolet Trailblazer in 2005. Buying it was a nightmare. It took three hours of "negotiating" with the salesman going back and forth to the manager, till I was finally worn out and bought the darn thing for ,000. It’s a crappy car, that gets 12 mpg and it lost about 30 percent of its value the minute I walked out of the showroom. Now it’s got 40,000 miles on it. I probably couldn’t unload it for more than ,000, so I’m stuck with the dinosaur. The whole car business stinks and I decided never to buy a new car again. No, wonder they’re in trouble. I say go to Chapter 11 – Big Three!
When it was new it made a good presentation. I was stupid to buy it. But, the whole model, from the Unions to the dealerships, is outdated. Where I live, Tom Benson and Ronnie Lamarque have made big forturnes from the dealer business. I’m sure there’s some car dealer tycoon in your town too. Something is wrong with the whole business model and it needs to be revamped top to bottom.
OK I take poirsonol reponsability for a dumb decision. No biggie, I’m not asking for a bailout. The carmakers maintain the stupid dealer method of selling let them take personal responsibility for the agency system that they set up. The carmakers, unions and dealers can all go to Chapter 11. I do feel for the workers, but let’s face it they are part of the system too. Let them take personal responsibility for what their union representatives have done.

Concerning this "bailout" and people who so *Badly* want this to happen….

are these NOT the *Exact* same people who did *Not* want the people of America to file "Bankruptcy" so changed the law in 2005 so that *Now* us "regular" folks have to pay the bankruptcy back?
https://www.totalbankruptcy.com/bankruptcy_law_updates_year_later.htm

***Now*** they want to "Bailout" (or should I say grant a bankruptcy to) these people…

They too, should be required to take "special classes on *How* to conduct business in a proper mannerr.

They too, should be required to "Pay Back" their protion of this 700 BILLION Dollar Bankruptcy…. (clearing throat…) I mean "BailOut"

That they want us "regular" folks to pay for in OUR taxes and our Children’s taxes and our Children’s Children’s taxes and so on and so on. (When will this 700 Billion Dollars be cleared up?!?! LOL!!!

Do You Agree?

According to the provisions in the bailout the auto companies either have to come up with a plan that will turn things around or face chapter 11 bankruptcy. If they do not comply, there is no more money and they have to pay back what they got. Do you really believe the Democrats will enforce that provision or just continue giving them more money and create subsidized business entities?

Does anyone know how the minds of these elected officials work? Are they smoking CRACK down there or what?
They decided to "rehash" the defeated "Welfare for Wall St" scam!
They have no idea how to pay for this 700 billion dollar handout to executives making in excess of 100 million a year plus golden parachutes!
Yesterday, they decided a remedy to bring votes onboard would be to give BIG BUSINESS a tax break! How ludicrous is that? How do you give tax breaks to an industry that already doesn’t pay a dime in income taxes? Sounds like the candy store has just been restocked!
Where are they going to get this money from?
Oh yeah, their going to increase the FDIC to 0,000–for who? Wall St executives???? Main St is going to be flat broke after this melt down!
The only people that have an intrest in the Wall St bailout is:
Wall St itself- so it can manipulate more markets like gasoline
The filthy Rich- so they can enhance their portfolio
Politicians- Like George Bush who has a big Personal stake and other politicians that have portfolios and re-election funding
Will it help you and I??? NO!!! WHY??? Because your taxes will go so out of sight you won’t be able to afford to pay attention!
Is their anything in this package for those of us who would foot the bill???? ABSOLUTELY NOTHING!!!!! ZILCH!!!!
However, would 700 billion help fix the social security system that Regan raided? Would it provide health insurance to every LEGAL American? Would it help our infastructure that has been on the back burner for over a century? Would a 00 stimulous check to every LEGAL American help out? You bet your A*s it would and ALL taxpayers would benefit!
Did they revert the bankruptcy laws for the average American to "save face" with the foreclosure crisis? NO
Are you as a taxpayer going to profit? NO
This welfare program is to bail out the filthy rich and nothing to do with you and I! They’re still wiping their tears because they lost 1.4 trillion at the stock market in one day! Gee, how pathetic!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
Remember what Lorena Helmsley once said—"Only the little people pay taxes"!! I hope you’re listening folks!!!!!!!!!!!!!!!!!!!!!!!!!
Call, write, e-mail your congressional leaders and express your opinion!

Instead of bailing out the large banks who caused this mess I have a real solution.

Freeze all foreclosures. Legislate that the money that would otherwise go to a "bailout" to banks, be given to the lending institutions that the foreclosing property owners owe in back payments to make them current, so they can start from scratch. Do not include mortgage brokers but the direct banks involved, so there are no closing costs, title searches or that litany of costs typically incurred in refinancing.

Restructure the loans for 40 or 50 years if necessary so that the new payments will be lowered (yes people will die before it is paid, but leave that to the heirs to decide to keep the property and continue payments or sell it).

Provide the lowest possible interest rate at .01% above the cost of the bank loan based upon the wholesale interest rate. Prevent the selling of any loan on the secondary market to any institution that is not solvent to again prevent another disaster. This way, people get to keep their home, lower their payment and the bank still gets its cash flow that they need to stay in business.

Then, legislate that the negative credit reports of these distressed homeowners be erased; with the stipulation that it only include home mortgages; not credit cards or any other kind of debt.

Finally, if all else fails, repeal the Bush bankruptcy code so that individuals can claim bankruptcy if they must, and make it so that one does not have to hire a lawyer (which they cannot afford) in order for it to be discharged. It’s easy for a big bank to do it, so why shouldn’t it be easy for me?
My plan does limit compensation to CEO’s. The reason I place the money toward the distressed homeowners is because it would be less expensive than 0 billion. If we "bailed out" these predatory lenders, it would send a signal that we will do it again.

The people who received these loans are not at fault. The banks told them (ME) that they qualified and that they would refinance these loans later, "No problem" they said. Then when it came time to do that, the banks said, "You don’t qualify". My three year ARM was ABOVE prime rate at 6.76% to adjust to 8.9% in 3 years. Didn’t tell me that I couldn’t refinance before that without paying a 00 penalty. These were predatory loans that consumers knew nothing about. Why would a bank lend me money if they KNEW couldn’t be paid back? I paid my loan on time every month + . Then tell me that I don’t qualify for a new loan? Because I put 30% down and they wanted my house to sell for a profit.

Nov. 12 (Bloomberg) — General Motors Corp. rose 5.5 percent in New York trading after House Speaker Nancy Pelosi urged Congress to pass an industry bailout, embracing the premise that GM is too big to be allowed to fail.

In backing an emergency aid plan, Pelosi rejected calls to let the largest U.S. automaker collapse, saying she wanted to stop the loss of millions of jobs. Today, House Financial Services Committee Chairman Barney Frank proposed tapping billion from the 0 billion in bank-rescue funding.

“Trying to reorganize the auto industry in bankruptcy would be as close to reorganizing the whole U.S. economy as you could get,” said Alan Gover, a bankruptcy lawyer with White & Case LLP in New York. “The vast supply chain involves thousands of businesses, millions of existing jobs and just as many retirees, as well as whole communities and states.”

http://www.bloomberg.com/apps/news?pid=20601110&sid=a8oQkqyRcU6Y

Bailout isn’t going to happen…
and the more I think about it the worse the bailout idea gets

from link:

Reorganization Under the Bankruptcy Code

The chapter of the Bankruptcy Code providing (generally) for reorganization, usually involving a corporation or partnership. (A chapter 11 debtor usually proposes a plan of reorganization to keep its business alive and pay creditors over time. People in business or individuals can also seek relief in chapter 11.)
http://www.uscourts.gov/bankruptcycourts/bankruptcybasics/chapter11.html

That is the way it’s done when company can no longer compete…for whatever reasons…isn’t it?

Excerpts:

This bailout was a terrible idea. Here’s why.

The current mess would never have occurred in the absence of ill-conceived federal policies. The federal government chartered Fannie Mae in 1938 and Freddie Mac in 1970; these two mortgage lending institutions are at the center of the crisis. The government implicitly promised these institutions that it would make good on their debts, so Fannie and Freddie took on huge amounts of excessive risk.

Worse, beginning in 1977 and even more in the 1990s and the early part of this century, Congress pushed mortgage lenders and Fannie/Freddie to expand subprime lending. The industry was happy to oblige, given the implicit promise of federal backing, and subprime lending soared.

This subprime lending was more than a minor relaxation of existing credit guidelines. This lending was a wholesale abandonment of reasonable lending practices in which borrowers with poor credit characteristics got mortgages they were ill-equipped to handle.

The obvious alternative to a bailout is letting troubled financial institutions declare bankruptcy. Bankruptcy means that shareholders typically get wiped out and the creditors own the company.

Bankruptcy does not mean the company disappears; it is just owned by someone new (as has occurred with several airlines). Bankruptcy punishes those who took excessive risks while preserving those aspects of businesses that remain profitable.

In contrast, a bailout transfers enormous wealth from taxpayers to those who knowingly engaged in risky subprime lending. Thus, the bailout encourages companies to take large, imprudent risks and count on getting bailed out by government. This "moral hazard" generates enormous distortions in an economy’s allocation of its financial resources.

http://www.cnn.com/2008/POLITICS/09/29/miron.bailout/index.html?iref=mpstoryview

Why is this not considered as being an option? Why must the taxpayers foot the bill for bad decision making?