Category: Bankruptcy

On Saturday October 8th, Delphi Corporation ended the intense
speculation of media and industry watchers by filing for Chapter 11
bankruptcy protection in the U.S. Bankruptcy Court for the Southern
District of New York.[1]  Sources inside Delphi had indicated as late
as Friday that such a move was likely unless Delphi could negotiate a
last-minute reprieve in the form of a bailout package from its largest
creditors, General Motors and the United Autoworkers Union.

While Delphi is surely struggling, it is not currently strapped for
cash. So why file now? The answer lies in both the legal climate and in
business strategy.

Avoiding the New Bankruptcy Law

Delphi Corporation, along with 38 domestic subsidiaries and affiliates, filed voluntary petitions per 11 U.S.C. §
311 of the Bankruptcy Code, seeking relief under Chapter 11. [2]  In
one of the 40-plus motions filed on Saturday, Delphi requested joint
administration [3] to allow … Read the rest

The aftermath of Hurricane Katrina has sparked renewed debate over
stricter provisions in the new bankruptcy law that takes effect on
October 17th. Higher filing fees, more stringent document requirements,
and mandatory credit counseling are all cited as especially burdensome
for victims of natural disasters. Democrats are concerned that the
controversial financial means test will deny Katrina victims the
ability to declare a fresh start, and have proposed an exemption in a
bill referred to the Senate Committee on the Judiciary on September
8th. [1]

Republican backers of the new law instead urge that the stricter
standards won't apply to those most in need and that judges will retain
the discretion to take Katrina into account when processing bankruptcy
claims. The reluctance to accept any exemption could be a costly move
politically, given the much-publicized lag in aid at the outset of
Katrina. Now with recovery efforts in full swing, … Read the rest