Commercial Bankruptcies: Chapter 7 Bankruptcy Petition

The items below are excerpted from the Business Bankruptcy News Bulletin. A full issue contains information on dozens of troubled companies, as well as informational and analysis highlights. Please visit the insideARM bookstore for information on subscribing to the Bulletin.

When determining when to file for bankruptcy, an issue to think about is whether delaying the filing can place the debtor within the current monthly income guidelines as determined by the state of the filing. A debtor planning to file Chapter 7 must demonstrate that it doesn’t have sufficient earnings that would otherwise require a Chapter 13 bankruptcy. The process of determining a debtor’s income in this context is known as “The Means Test”. This test makes use of the debtor’s income in the six months leading up to the bankruptcy filing and is referred to as the debtor’s “current monthly income”.

One problem with this test is that even if the debtor’s income has fallen, using the six months before the filing could make the debtor’s income for bankruptcy purposes higher than it will actually be and put the debtor into an income classification such that the debtor could be required to file Chapter 13 instead of Chapter 7. If a recent decrease in income or a job loss, it may be best to wait and allow the falling income to be reflected in the current monthly income calculation. Current monthly income is only one factor of many that should be considered in deciding whether to wait to file a bankruptcy petition. In any case, the advice of an experienced bankruptcy lawyer is recommended when deciding whether and when to file for bankruptcy protection and what type of bankruptcy filing is appropriate.

Creditors Line Up Behind Produce Growers and Shippers In a Bankruptcy Filing

A little known commerce provision assures that growers and shippers of produce get a first crack at recovering what they’re owed in a bankruptcy case. While creditors generally receive only a portion of what they are owed, according to the Perishable Agricultural and Commodities Act, shippers and growers are entitled to line up first and be fully reimbursed. And if the business, particularly in a Chapter 7 filing, can’t pay up, then the shippers and growers can go after company executives personally. The basis for paying off shippers and growers is supposedly that they operate on very thin margins. So when restaurant companies go under, their produce suppliers typically get paid, regardless of what other creditors might get.  As one bankruptcy attorney put it, “under PACA, you’re exempt from bankruptcy and your money is held in trust…”

B&B B Inc., Mesquite, Nv., filed Chapter 11 in the U.S. Bankruptcy Court in Nevada. The firm listed assets of between $10 million and $50 million and liabilities of between $100 million and $500 million. The filing was under case number 10-13305. For more information contact the court at 800-314-3436.

Greenwood Financial Inc., Wilmington, De., filed Chapter 11 in the U.S. Bankruptcy Court in Delaware. The firm listed assets and liabilities of between $100 million and $500 million each. The filing was under case number 10-10690. For more information contact the court at 302-252-2560.

Mail Advertising & Bindery Inc., Smyrna, Ga., filed Chapter 11 in the U.S. Bankruptcy Court for the Northern District of Georgia. The firm listed assets and liabilities of between $1 million and $100 million each. The filing was under case number 10-65743. For more information contact the court at 800-510-8284.

Regent Communications Inc., which has filed for Chapter 11 bankruptcy protection, filed a plan with the U.S. Bankruptcy Court to reduce its debt by $87 million in a deal that would hand over most of the new equity of the reorganized firm to Oaktree Capital Management LP. The plan reportedly has the support of Regent’s lenders but must be approved by the court. The bankruptcy filing by the Cincinnati, Oh. firm, in the court in Delaware, listed assets and liabilities of $166 million and $211 million respectively. Regent, which filed along with nearly fifty affiliated debtors, made its filing under case number 10-10632. For further information contact the court in Wilmington, De. at 302-252-2560.

RQB Resort LP in Florida filed Chapter 11 in the U.S. Bankruptcy Court in Jacksonville, Fl.  The firm reportedly faces assets and liabilities of up to $500 million each. 

White Birch Paper Co. of Quebec, the second-biggest manufacturer of newsprint in North America, is reportedly seeking court permission for a $141 million debtor-in-possession financing facility as it works to improve its fortunes and become a stronger competitor in the newsprint market. The company recently filed for bankruptcy protection under Canada’s Companies’ Creditors Arrangement Act in a bid to strengthen its capital structure. White Birch added that talks with its creditors and shareholders have been “productive”. The firm’s unit in the U.S., Bear Island Paper Co., itself filed Chapter 11 in the U.S. Bankruptcy Court in Virginia and White Birch’s Canadian operations recently filed in the U.S. under Chapter 15.