Bankruptcy involves a situation in which a debtor legally becomes insolvent due to failure to repay outstanding debts. A typical example of the world’s largest bankruptcy is the UAL Corporation; an airline holding company that operates the Unites Airlines Inc. The UAL first encountered the financial crisis in 2001 with a net loss of $2.1 billion.
Debtors filed a petition against the corporation that manifested Chapter 7 of bankruptcy as regards the liquidation of assets. Additionally, the corporation sold nonexempt properties in an attempt to settle its debts (White, 2014). Usually, Chapter 13 of the bankruptcy law allows the debtors to keep their properties though with a mandatory obligation to repay their debts within a 5-year maximum period. This is a serious legal issue that applied in the case of the firm in addition to the readjustment of the company’s debts for municipality purposes in accordance with Chapter 9 of the bankruptcy law. Therefore, the corporation managed to file Chapter 11 of the law to enhance its reorganization plan so as to pay back all the creditors associated with the bankruptcy.
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Debtors are always responsible for payment of debts as they become due. However, during the UAL Corporation’s bankruptcy, debtors filed the bankruptcy case, listed all the creditors, scheduled both assets and liabilities, and scheduled both current assets and expenditures in addition to provision of a statement of debtors’ financial affairs (Legal Information Institute, n.d). The debtor is also responsible for the filing of copies of entire payment recommendations to act as evidence of the same in a 60day timeframe before the filing date is due. This must involve all itemized statements showing the net income of the company on a monthly basis, in addition to the legal procedures on how the amount is calculated. The filing must also involve statements regarding anticipated income or expenditure increments on an annual basis (Legal Information Institute, n.d).
Furthermore, the debtor must cooperate effectively to enable the trustees carry out their duties appropriately. They must attend meetings organized by creditors held by the trustees to take part in the discussions and any other follow-up meetings. Notably, the debtor must also present recorded information of the corporate company’s features including books, documents, past records and other important papers (Legal Information Institute, n.d). However, creditors have the duty of terminating collection efforts upon receipt of an official notice from the bankruptcy court. After the notification, the creditor must undertake further inquiry into the independent determination of whether the case has been filed or not. In most cases, the court must call the court prior to repossession of properties after listening to the debtor’s advice regarding the imminent filing. Chapter 9 bankruptcy grants powers to challenge the eligibility of the municipality debtor with regards to the same Chapter’s bankruptcy proceedings (White, 2014). This can further involve objections to the debtor’s proclamations during court proceedings. Such powers give them the opportunity to vote against reorganization plans and organize for securing special revenue bonds for the most important schemes.
The UAL experienced awash in debts in 2002, a financial distress that led the company to bankruptcy. The corporation expected government loan for bail out though its expectations failed to materialize; leaving it with a massive fleet of planes that it owed other companies. Therefore, it experienced shrinking revenues in addition to payment of wages that conformed to uncompetitive union wage structures; hence, its failure in 2002. However, the corporation reorganized itself and emerged as a new company four years later. Hence, the company enjoyed massive advantages including clearance of most of its debts after being discharged from bankruptcy and the unsecured creditors also had no opportunity to pursue some other legal actions. Conversely, the corporation lost a number of its valuable properties as a result of being bankrupt. The key difference between corporate bankruptcy and personal one involves the loss of credit cards for the case of the latter. However, personal bankruptcy can keep you away from aggressive lenders that you owe student loan debts during collection actions.
References
Legal Information Institute. (n.d). 11 U.S. Code § 521 - Debtor’s Duties. Cornell Law School Press. https://www.law.cornell.edu/uscode/text/11/521
White, M. J. (2014). Chapter 14: Bankruptcy Law. University of California Press, San Diego. Retrieved from http://econweb.ucsd.edu/~miwhite/Handbook-proofs.pdf
