Commercial Bankruptcy
The main headline on just about any newspaper or website in recent days has been General Motor’s bankruptcy filing. You can get enough info on GM from the million stories out there, so instead let me give you the 60-second lesson on commercial bankruptcy.
Similar to Chrysler’s recent bankruptcy filing, GM has filed for Chapter 11 bankruptcy, which is a reorganization of commercial debt with government protection against shareholders pounding down the doors and asking where their money went. Basically, the business receives protection and the opportunity to “get back on its feet.” Chapter 11 is not an attempt to liquidate assets, shut the door, and call it a day, but rather a last-ditch attempt at reorganizing a company for long term sustainability.
As it relates to GM, its assets have been sold to the U.S. Department of the Treasury (via a new entity called Auto Acquisition Corp.) in the hopes that a slimmed down version of the company will be able to reduce the $172 billion in debts while sitting on only $82 billion in assets. 1
I encourage comments on this post by some knowledgeable lawyers who can shed a little more light on the advantages/disadvantages of commercial bankruptcy.
Read on:
USA Today – It’s official: GM files for bankruptcy protection
GM’s bankruptcy filing (it’s surprisingly brief and easy to understand – a mere 24 pages)
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