Last week President Obama announced that the federal government would make $300 million available to Detroit in an effort to help the city take steps to recover from bankruptcy.
Lawyers representing American Airlines and US Airways filed a motion on Tuesday with a federal court insisting that the Department of Justice release the names of individuals they interviewed before filing a motion to block the planned merger of the two airlines.
Robin Williams is known for making people laugh. Whether in his stand-up comedy routine or many of his acting roles, comedy has been a staple of Williams’ career. But Williams does not consider his finances a laughing matter, especially since he is having to downsize in order to avoid filing bankruptcy.
Kodak, which has been a name synonymous with photography for well over one hundred years, is expected to emerge from bankruptcy protection today.
To the average American, entertainers are at the top of the food chain when it comes to making money. It is no big secret that, although entertainers can make a great deal of money, not all of them have money management skills. They often file for bankruptcy protection. Nevertheless, if the average person who has money management skills made the kind of money entertainer’s make, their skills would certainly help prevent bankruptcy. Continue reading
Celebrity Toni Braxton is an American Rhythm and Blues singer, songwriter, record producer, actress, and philanthropist. She has won six Grammy Awards, seven American Music Awards, and five Billboard Music Awards in her career. Toni Braxton has sold over 60 million records worldwide, but despite her obvious financial success within various entertainment industries, she filed her second bankruptcy within four years on October 6, 2010, reporting over $50 million in debts. Now, she may be facing bankruptcy fraud. Continue reading
Bankruptcy is not a respecter of persons. Bankruptcy can happen to the rich, the poor, those in higher standings, those in lower standings, those with good financial heads, and those with poor heads for finances. Bankruptcy sometimes just happens.
Bankruptcy might be happening to the recently hired head football coach of the University of Arkansas, at least according to an article posted on the Huffington Post news website yesterday.
John L. Smith, a former coach at Michigan State, Louisville, and Arkansas is returning back to Arkansas from coaching his alma mater, Weber State, this past season. He has signed a 10 month $850,000 contract to coach the University of Arkansas Razorbacks for the 2012-2013 football season as its new head coach. Arkansas is expected to open the season ranked in the top 10.
It seems that Smith, like the rest of us, got caught up making poor real estate investments right before the start of The Great Recession. Building a land development and investment firm with a group of partners through the use of easy leverage money, the economy caught up with the group. The slow down in the economy caused Smith and his group a difficult time in maintaining their investments.
One of Smith’s partners has already filed for bankruptcy protection listing total liabilities somewhere between $10 million and $50 million. He named Smith as one of his creditors. Smith indicated his investments at risk were somewhere in the multimillion dollar range but was not ready to divulge details.
The athletic athletic director for Arkansas, Jeff Long, had initial concerns but reported that Smith was forthcoming in his financial difficulties when he applied for the job. Long said there was nothing inappropriate about Smith’s predicament, other than he engaged in a risky financial deal, and the situation had nothing to do with his ability to perform his coaching duties.
Smith was quoted as saying, “From a personal standpoint, I don’t want the university being embarrassed, and I’m not embarrassed. It’s something that’s happened. I made some mistakes, and to be honest with you, I’m a football coach, not a businessman.”
Smith has indicated he has already started preparation to file for bankruptcy protection. He isn’t one hundred percent sure he will file, but he concluded with, “that’s where I am proceeding to get my plate cleaned up.”
This writer agrees with the athletic director in that the head coach of Arkansas considering bankruptcy is a responsible act to try and eliminate a bad financial situation. He is considering every possible business alternative to alleviating his predicament. Filing for bankruptcy protection is just simply one of those possibilities. It is an opportunity to “get your plate cleaned” and financially start afresh.
There is nothing inappropriate about filing for bankruptcy protection when the need arises. If you are considering filing for bankruptcy protection, you should know that bankruptcy laws can be complicated, and you might want to consult with a bankruptcy attorney.
- APNewsBreak: Arkansas’ Smith Facing Bankruptcy (nytimes.com)
According to news reports, Curt Schilling, the former Major League Baseball (MLB) star whose MLB career spanned almost two decades, filed for Chapter 7 bankruptcy protection back in May of this year for the failure of his 38 Studios video games business. So in effect, you might say another baseball star who files bankruptcy and bites the dust.
Throughout professional athletics history, it has been estimated that between 60 and 78 percent of all professional athletes eventually either go broke, or they are in financial trouble inside of five years from retiring from their sport. Whether or not an accurate statistic, there definitely seems to be an inordinate amount of professional athletes who get into financial trouble after retiring.
Schilling, who founded his video game company in 2006, retired from baseball in March of 2009 and meets the five year bankruptcy plan for the statistics quoted. He remained the company’s chairman until its demise and has estimated personally investing more than $50 million and raising another $5 to $10 million from other investors to support the failing company.
In addtion, 38 Studios listed a $75 million state guaranteed loan that the state of Rhode Island lent the business as a lure to get the business transferred from Massachusetts last year. The Governor of Rhode Island, Lincoln Chafee, frantically tried to keep the company solvent, but with the filing of the Chapter 7 bankruptcy, it became too late for creditors to interfere. Chafee ordered a forensic audit of 38 Studios in hopes of discovering some edge on obtaining the company’s assets, but the company is being liquidated and all creditors will be paid according to the priority rules of federal bankruptcy. That includes any state backed debt.
The state is not the only creditor listed in the bankruptcy. There are over 1,000 creditors listed, and according to court records, the debts are in the millions. Included in the debts is compensation for employee’s, their health insurance, and the mortgage payments that were promised the employees who moved from Massachusetts to Rhode Island. The employees are now stuck with not only a loss of a job and their health insurance, but many now have two mortgage payments.
According to news reports, most everyone, including the employees, was kept in the dark about the finances of the company. Schilling even got on radio as late as last week to claim how sudden the failure came. The failure was anything but sudden, and has been happening ever since the inception of the business, at least according to profit and loss statements showing the company has not made a profit since it was formed.
Why Schilling feels he must get on a public media format to defend himself in lieu of his bankruptcy actions seems like a desperate action to rebuild his public image. I wonder if now he is more interested in how the public will perceive his chances for the Baseball Hall of Fame instead of any genuine concern for the failure of company and what it did to his employees who depended on him. Maybe it is not fair or true to make that assertion about Schilling, but it does appear that way. After all, he appears to be just another baseball star who files bankruptcy and bites the dust.
Leigh Steinberg has recently come forward in the news media to set the record strait about his financial affairs and personal life. Steinberg is known as the agent whom represented famous athletes and inspired the movie, Jerry McGuire.
In a self written article posted online in ThePostGame of Yahoo Sports, Steinberg wrote, “The public interest in my financial affairs and the inaccurate descriptions of my situation have led me to write this column: Today I have filed for Chapter 7, personal bankruptcy.”
A Chapter 7 is a type of bankruptcy that is the simplest and easiest type to complete. Commonly called liquidation, a Chapter 7 enables a person who has more debt than income to overcome some of the debts through discharge of their non-exempt debts.
You might think a man like Steinberg who has represented some of the most famous names in football would not even be eligible to file a Chapter 7, let alone go completely bankrupt.
In order to file a Chapter 7, you have to either make less than the median family income for similar size families in your area or pass the Means Test. Since most Chapter 7 applicants do not have any assets to liquidate, Steinberg’s lifestyle and bankruptcy become particularly interesting to those who work in the bankruptcy industry.
What is interesting is Steinberg’s explanation of why he is filing a Chapter 7. He stated in the article, “I delayed taking this step for a number of years because of my moral and legal obligation to people who advanced me funds or performed services in good faith. But the constant and aggressive collection efforts and press initiatives undertaken by creditors have harassed my family and prevented me from working to be able to pay these debts. Prospective clients have been pushed away after receiving notice of my debts. It doesn’t seem logical to prevent a person who owes you money from working in their chosen field by attempting to ruin his reputation, but that is what has happened. I have lived with this in recent years, and it is time to follow a more constructive path.”
Steinberg admits in the article to another cause for his financial demise, alcoholism. He stated that his addictive behavior contributed to his voluntarily placing his finances and business aside until he was able to overcome his problem.
Like you, famous people handle their problems similarly. Steinberg allowed an addiction to influence his financial decisions, and when he got into financial difficulty with his creditors, he is doing what you might do in his situation. He is filing for Chapter 7 bankruptcy protection, if for no other reason than to take advantage of the automatic stay of the bankruptcy court. The automatic stay will stop the aggressive collections and harassment from the collection agencies.
In addition, just like you, he most likely needs a fresh new start, “a more constructive path” he called it. He not only needs a fresh new start financially, but from his alcoholism as well.
If you need a fresh new start with your financial situation, contact a bankruptcy lawyer today.
A Recent Bankruptcy News Story
According to recent news sources, Eastman Kodak filed for bankruptcy protection last week. By filing, Kodak is seeking to increase its cash position in order to stay in business. In anticipation of filing the Chapter 11, Kodak borrowed $950 million from Citigroup this past Thursday to pay for operations during its reorganization plan. Bankruptcy came after numerous failures by Kodak within the digital photography industry, and because the company failed to sell its 1100 digital imaging patents purportedly valued in the billions of dollars. Kodak earlier stated if they could not sell the patents the company stood a real chance of running out of cash within a year.
Chapter 11 Defined
A Chapter 11 is a type of bankruptcy used to protect assets of a business, whether run as a sole proprietorship, partnership, or corporation. A Chapter 11 under the Bankruptcy Code permits an insolvent business to make a reorganization plan in order to become solvent again.
In most Chapter 11 cases, the debtor stays in control of the business operations as the debtor in possession, but the debtor is still subject to the oversight and jurisdiction of the bankruptcy court.
Like a Chapter 7 the assets in this type of bankruptcy can be liquidated, but the proceeds will be used to improve the solvency of the overall state of business. Like a Chapter 13 bankruptcy, the reorganization plan can be designed over a specific time span, but unlike a Chapter 13 where the debtor is the only one to propose a plan, a creditor or any interested party may propose a plan after 120 days have passed where the debtor has not proposed an approved plan.
The Confirmation Hearing
The confirmation hearing on a Chapter 11 reorganization plan is held and the bankruptcy court judge must approve the plan along with all of the creditors. If one class of creditors does not approve the plan, the plan may still be confirmed if the requirements of cram down are met. To be confirmed over the objection of a class of creditors, the plan cannot discriminate against that class of creditors and must be found fair and equitable to that particular class.
After the plan is confirmed, it identifies how debts are to be treated, how the operations of the business will be affected, and the duration of the plan.
Other Considerations Specific to a Chapter 11
- If the debts of the business exceed its assets, the rights of the owners are immediately ended and the ownership of the newly reorganized company is transferred to the creditors.
- The business filing a Chapter 11 is effectively operating under the protection of the court until it emerges. The court has great leeway in seeing to it that a company emerges solvent. The court can often forestall the rights of the creditors to ensure the company emerges.
- If a company filing a Chapter 11 publicly trades their stock, filing generally causes the stock to be delisted from its primary stock exchange, but many of the companies are successful at trading their stock in over the counter markets. Most Chapter 11 plans, when confirmed, tend to render the stock valueless.
Eastman Kodak stock closed on the market today with a price of $.533. Kodak was trading at almost $45 in July of 2003.
- Bankruptcy Basics: Six Basic Types of Bankruptcies (betterbankruptcy.com)
- Discharge of Debt in Bankruptcy? (betterbankruptcy.com)