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    Chapter 11

    *POSSIBLE SPOILER FOR ANYONE WHO, LIKE ME, IS BELATEDLY CATCHING UP WITH SIX FEET UNDER*

    I've just watched an episode of Six Feet Under in which it's mentioned in passing that Kroehner, the evil rival company to Fisher & Sons, has just "filed Chapter 11" or maybe "filed for Chapter 11".

    What does that mean?

    (Please try to avoid any Six Feet Under spoilers in your answers...)

    #2
    Chapter 11

    Bankruptcy.

    More here.

    Comment


      #3
      Chapter 11

      It's one of the ways of declaring bankruptcy.

      Comment


        #4
        Chapter 11

        Cheers.

        How odd, though. There had been no indications that the company was in trouble. I guess we're meant to assume that they overstretched themselves with their acquisitions, but it's a bit of a childish "and then the baddie got killed and everyone lived happily ever after" cop-out.

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          #5
          Chapter 11

          There are also different kinds of Chapter 11.

          A friend of mine was a senior manager in a company that went into a specific type of Chapter 11 which facilitates management buy-outs. Which is what they did.

          Comment


            #6
            Chapter 11

            Types of Bankruptcy

            The four types of bankruptcy are named for their respective chapters in the United States Bankruptcy Code. The type of bankruptcy that you file depends on several factors, including whether or not you are an individual or part of a corporation.

            Chapter 7 is what most people mean when they say, "I'm filing for bankruptcy." This is a liquidation bankruptcy, which means that the trustee sells off all non-exempt assets held by the debtor so that the debts can be repaid to the fullest extent possible. Individuals, corporations and partnerships are all eligible for Chapter 7 bankruptcies. The portion of the debt that can't be repaid through liquidation is discharged. Businesses generally try to avoid Chapter 7, because it is impossible to conduct business operations. Income generated after the bankruptcy filing is not a part of the bankruptcy -- the debtor can keep it.

            Chapter 11 is the most complex bankruptcy filing and the one that most troubled businesses file (although some individuals may file it as well). In a Chapter 11 bankruptcy filing, the debtor continues to function, maintains ownership of all assets, and tries to work out a reorganization plan to pay off creditors.

            In the past, a business had an almost unlimited amount of time to come up with their reorganization and payment plan. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 imposes a 120-day time limit. If the debtor has not submitted a plan within that period, creditors can submit their own plans.

            Chapter 12 is specifically for farm owners. The debtor still owns and controls his assets and works out a repayment plan with the creditors. Chapter 13 is like Chapter 11, but for individuals. The debtor retains control and ownership of assets. He also works out a three to five-year repayment plan. Some portion of the debt may be discharged, depending on the income of the debtor. There are also limits on the amount of debt involved.

            Comment


              #7
              Chapter 11

              Is Chapter 11 like administration, then?

              Comment


                #8
                Chapter 11

                In broad outline, yes.
                Different in its details, of course.

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                  #9
                  Chapter 11

                  If administration is the company still holding onto the company without having a going out of business blowout sale, then yes.

                  Comment


                    #10
                    Chapter 11

                    Chapter 11 sounds like Administration coupled with a CVA or an IVA to me.

                    Comment


                      #11
                      Chapter 11

                      That would assume the company in question "emerges successfully" from the Chapter 11 process pursuant to what we would call a "plan of reorganization".

                      Not every company does so, however. Some are never able to work out a deal with their creditors, and are therefore liquidated.

                      Comment


                        #12
                        Chapter 11

                        isn't chapter 11 the postal address of most american airlines?

                        Comment


                          #13
                          Chapter 11

                          You betcha.

                          A number have been through the entire process more than once, and Aloha, ATA and some other smaller carriers just filed earlier this week.

                          Comment


                            #14
                            Chapter 11

                            I'm not sure I've ever really heard the phrase being used in any other context.

                            Comment


                              #15
                              Chapter 11

                              That's just a function of airlines' visibility and the very high percentage of them that have been in Chapter 11 at one time or another.

                              There were more than 25,000 Chapter 11 filings last year, and that figure is expected to increase significantly in 2008.

                              Comment


                                #16
                                Chapter 11

                                Thanks for the information, chaps.

                                Comment


                                  #17
                                  Chapter 11

                                  Thanks to the credit card companies, it's become very difficult for individuals to file for bankruptcy and have their debts forgiven. Basically, it all stems from a bill passed in 2005 that means that only the poorest people can file Chapter 7 and have your debts cleared after your assets are sold--instead, you have to file for Chapter 13 and go into a court-ordered payment plan. James Surowiecki wrote about it last week in the New Yorker's always good Financial Page:

                                  Historically, the U.S. has treated debtors leniently. But the credit-card industry, which was the driving force behind the new law, insisted that tolerance had caused a bankruptcy “crisis”: the number of bankruptcies in the U.S. quintupled between 1980 and 2003. Irresponsible debtors, the argument went, were buying plasma TVs and fancy vacations and then declaring bankruptcy to escape their debts. And they were being supported by the rest of us, who had to pay higher interest rates and fees on our credit cards to cover credit-card companies’ billions in annual write-offs. Cracking down on those who “abused the bankruptcy laws,” President Bush said, would therefore “make credit more affordable.” And we’d all be better off.

                                  So are we? That depends on your perspective. The law did slash the number of bankruptcies—they fell by sixty-two per cent between 2004 and 2006. And the credit-card companies should be happy—their profits rose thirty per cent between 2005 and 2007. But the law hasn’t done much for anyone else. Interest rates and credit-card fees have not fallen as promised. And for debtors life has become significantly harder: many can’t afford bankruptcy—strangely enough, it’s possible to be too poor to pay the filing fees—and many others can’t qualify. These people will either spend the next five years having their paychecks garnished or simply muddle along, avoiding debt collectors and accumulating huge interest and late fees on their credit cards.

                                  One might say: so what? Even if bankruptcy is sometimes precipitated by bad luck or by an economic downturn, it’s always the result of people living beyond their means, and why should they get away scot-free while the rest of us pay our bills? It’s a fair question. But there’s a reason we did away with debtors’ prisons: having millions of people enslaved to their debts is a bad thing for an economy. Putting people into Chapter 13 essentially means they pay a heavy extra tax that goes straight to the credit-card companies. That creates a disincentive for debtors to work, since the more they earn the more they pay. It also takes away spending power—not the best thing during a recession. Making it harder for people to discharge their credit-card debts has other drawbacks as well. Homeowners would once do almost anything to keep up payments on their homes, even if it meant falling behind on other debts. In the past year, though, economists have reported an increase in the number of people who are just walking away from their homes, because it’s now often easier to abandon a mortgage than a credit-card bill. (The practice has even been given a name—“jingle mail,” because people simply send their keys back in an envelope.) So the new law may very well have exacerbated the housing crisis.
                                  ...
                                  It’s true, of course, that although we want people to get a second chance, we also want them to pay their debts, and a tougher law might have made sense if the U.S. really had been dealing with a crisis. But it wasn’t. While the number of bankruptcies soared, the economy as a whole showed no sign of strain; it grew briskly, creating millions of new businesses and new jobs. The credit-card companies themselves were doing fine, too: between 1995 and 2004, as bankruptcies nearly doubled, their profits nearly tripled. In responding to an imaginary threat, we ended up making the economy less dynamic and less flexible. Now that hard times are here, we may find ourselves with a genuine bankruptcy crisis. But it will be one that Congress created.

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