What is Bankruptcy Protection?

Bankruptcy protection Bankruptcy protection refers to whether the debtor voluntarily submits to the court or the creditor compulsorily applies to the court for bankruptcy reorganization, regardless of whether the debtor has the solvency. Arrangements that may detract from the interests of certain creditors and shareholders. This plan should be given a certain time to be submitted, and then approved by the creditors, confirmed by the court, the debtor can continue to operate. This is the concept of reorganization, also known as bankruptcy protection in Chinese.

Chinese name: Bankruptcy protection

Foreign name: bankruptcy protection

Overview of Bankruptcy Protection

In the usual sense, "bankruptcy" refers to "bankruptcy liquidation". Bankruptcy liquidation is the liquidation of assets and the closing of debts. Bankruptcy protection is similar to the "airbag" in the event of a traffic accident and can act as a buffer.

During the period of bankruptcy protection, creditors shall not be forced to repay their debts. A bankrupt enterprise, that is, a "debtor", can still operate as usual. The management of the enterprise continues to be responsible for the company's daily business, and its stocks and bonds continue to be traded in the market. Reports must be submitted to the Securities and Exchange Commission.

Companies applying for bankruptcy protection can reorganize their assets and divest bad assets to get the company back on track and become even stronger than before. However, if the reorganization of the company applying for bankruptcy protection fails, the bankruptcy liquidation will eventually be required.

The US Bankruptcy Law governs how a company ceases operations or how to get out of the debt abyss. When a company is nearing its end, it can invoke Chapter 11 of the Bankruptcy Law to "restructure" its business and strive for profit again. Bankrupt company

US General Motors filed for bankruptcy protection on June 1, 2009 The "debtor" can still operate as usual. The company management continues to be responsible for the company's daily business. Its stocks and bonds also continue to be traded in the market, but all major operating decisions of the company must be approved by a bankruptcy court. The company must also report to the Securities and Exchange Commission. submit a report.

If an application for bankruptcy is made in accordance with Chapter VII of the Bankruptcy Law, the entire business of the company must be stopped immediately and completely. The bankruptcy property custodian "cleans up" (auctions) the company's assets, and the proceeds are used to repay the company's debts, including debts to creditors and investors.

Generally speaking, if a company applies for bankruptcy in accordance with Chapter VII of the Bankruptcy Law, the shares in the hands of shareholders usually become a piece of scrap paper, because if the bankruptcy court confirms that the debtor is insolvent (liabilities are greater than assets), the shareholder investment may not be returned. In addition, after the company's liquidation priority repayment includes secured creditors and unsecured creditors, there is often little left.

Most listed companies will apply for bankruptcy protection in accordance with Chapter 11 of the Bankruptcy Law, rather than going directly to Chapter 7 for bankruptcy liquidation because they still want to continue operations and control bankruptcy proceedings. Chapter XI prescribes some procedures for revitalizing the company's business, and indeed some corporate restructuring plans are successful and profitability is resumed. But some companies ended up liquidating.

Relevant information shows that in accordance with the arrangements in Chapter 11 of the US Bankruptcy Law, an insolvent debtor who successfully applies for bankruptcy protection will be able to retain the property and control of the business. This arrangement gives the debtor and creditor a considerable amount of flexibility to cooperate and restructure the company, with a view to the company's return to life.

Purpose of bankruptcy protection

The core of bankruptcy protection is to create a special liquidation priority for restructuring financing. In the absence of this priority,

Bankruptcy protection At the second level, reorganizers often face a contradiction: reorganization can take place, new financing must be obtained to maintain business operations, and the high costs of reorganization steps such as asset cutting, structural adjustment, business reorganization, and employee demobilization must be paid, but rarely Some people dare to lend money to a bankruptcy enterprise, especially after most of its assets have been mortgaged, unless this new creditor is allowed to "gauze" in the order of repayment, which cannot be done in traditional civil law of.

In the United States, if a company applies for bankruptcy protection, its creditors cannot temporarily pursue the company's claims, and the company can have a respite. You can think of a solution within the period of filing for bankruptcy protection. Once the company has passed bankruptcy protection and got out of the bankruptcy court, it is equivalent to dumping the debt on its body and can easily enter the battlefield.

In addition to protecting the local interests of enterprises and individuals, bankruptcy protection is also conducive to preventing a large number of unemployment and has a positive significance for alleviating social conflicts and maintaining social stability.

Bankruptcy protection

The US subprime mortgage crisis has further deepened in recent days. On September 15, 2008, Beijing time, the 158-year-old Lehman Brothers announced its application for bankruptcy protection-and the fall of the fourth largest investment bank in the United States has affected its business in China-although Lehman China's statement It said that the bankruptcy protection was only the parent company, and that the Shanghai office was operating normally, but Huaan Fund issued a risk alert related to its international allocation fund, saying that the bankruptcy of Lehman may prevent it from conducting normal redemption business. In addition, Lehman's Asian futures securities business has ceased operations, and the Hong Kong Stock Exchange has suspended the trading of Lehman warrants in Hong Kong. Prior to this, Lehman Brothers' large investment in China may also be affected.

Bankruptcy Protection GM

At 20:05 Beijing time on June 1, 2009, GM formally submitted an application for bankruptcy protection to the local bankruptcy court in New York. The case number was Manhattan 09-50026, and it officially entered bankruptcy protection procedures. This is the largest bankruptcy protection incident in American automobile history. GM, which has just formally filed for bankruptcy protection, today confirmed a list of 14 factories that will be closed or shut down by the end of 2011. GM also announced that it will close three parts distribution centers in December 2011.

On July 10, 2009, after signing the documents for the sale of assets, GM announced on the morning of the 10th local time that it had broken out of bankruptcy protection, and a new GM was born.

GM CEO Han Desheng said at a press conference in Detroit that day, this is an exciting day for GM, and GM has entered a new era. He said that GM was going out of bankruptcy protection faster than anyone thought, and the company would work harder to repay the government's $ 50 billion loan to aid GM by 2015. GM completed the sale of its assets to New GM, and New GM began operations immediately after the sale process was completed. GM originally planned to leave bankruptcy protection procedures after 60 to 90 days, but in fact it broke out of bankruptcy protection procedures more than one month after entering bankruptcy protection procedures. New GM will obtain the best business assets of the original company and its business outside the United States, including other businesses in the Asia Pacific region. Han Desheng said that New GM will pay more attention to users and cooperate with Yibei Auction Network to conduct auto auction business online. He said that New GM will produce new family cars and trucks that more users need, and these vehicles will be transformed faster than in the past. General Motors declared bankruptcy on June 1 this year. The century-old company has lost more than $ 80 billion over the past four years, and last year gave up the throne of the world's largest automaker to Japan's Toyota. Han Desheng said at a press conference that the members of the new GM's board of directors will announce at the end of this month that the company will no longer have a North American president and that Han Desheng will directly lead GM's North American business.

Lehman Brothers

After failing to find a buyer, Lehman Brothers, which was the fourth largest investment bank in the United States, issued a statement early in the morning that the company would submit an application for bankruptcy protection on the same day. As soon as the news came out, the dollar and the US stock index futures fell in unison, indicating that the New York stock market may fall sharply that day.

Bankruptcy protection

According to the statement, Lehman Brothers Holding will be filing applications for bankruptcy protection to the US Federal Bankruptcy Court in the Southern District of New York on the morning of the 15th, excluding its financial companies. Lehman Brothers subsidiaries, including Lehman Brothers Asset Management, and Newberg Berman, which manages asset management and investment consulting, will continue to operate without the impact of bankruptcy and reorganization.

The board of directors of Lehman Brothers made a decision to apply for bankruptcy protection after failing to find a buyer on the 14th. On the same day, Barclays Bank, the third largest bank in Britain, decided to withdraw from the rescue of Lehman Brothers after the US government refused to provide financial guarantees. About three hours later, Bank of America also announced its withdrawal and bought Merrill Lynch.

After the government's refusal to save lives and the acquisition's retreat ended, Lehman Brothers finally decided to apply for bankruptcy protection under Chapter 11 of the US Bankruptcy Act. Once the application is approved, Lehman Brothers Holding will be on the path to restructuring under the supervision of a bankruptcy court. This will also be the largest bankruptcy case in the US financial sector since the bankruptcy company De Chong Securities Commodities Company went bankrupt in 1990.

Lehman filed for bankruptcy protection on September 15, 2008, and its bankruptcy amount reached a record 639 billion U.S. dollars, becoming the largest bankruptcy case in the history of the United States, and quickly generating a domino effect worldwide, which became the full-scale outbreak of the current financial crisis. Iconic event.

After applying for bankruptcy protection, Lehman's main body was "dead", the most important investment banking business was sold to Barclays Bank, and its asset management business was also split. During bankruptcy protection, Lehman continued to operate as a "Lehman Brothers Holding Company", and all business decisions were supervised by the bankruptcy court.

According to U.S. law, during the period of bankruptcy protection, creditors must not force the repayment of debts, which has earned Lehman a valuable buffer time, so that Lehman does not have to rush to sell assets at a low price, but also has enough time to propose a perfect bankruptcy and restructuring plan. Way to make arrangements.

During the period of bankruptcy protection, Lehman had conducted debt restructuring negotiations with creditors such as Goldman Sachs Group and Paulson Hedge Fund. The main content of the negotiations was to clarify the priority and proportion of repayment. Lehman Chief Counsel Harvey Miller said the negotiation process was extremely difficult and time-consuming. "In the meantime, I had to increase the amount of antihypertensive medication."

In the end, Lehman reached a settlement plan with creditors and submitted it to the New York Bankruptcy Court, which was approved by the court last December. Since then, Lehman has begun to sell assets to clear claims.

Lehman Chief Operating Officer John Suco said in a statement ending bankruptcy protection that after nearly three and a half years of bankruptcy protection, Lehman has now finally entered the final liquidation stage and started paying its creditors.

GTAdvancedTechnologiesInc. Bankruptcy protection GTAdvanced Technologies Inc.

Apple's mobile phone partner and sapphire screen supplier GTAdvanced Technologies Inc. (hereinafter referred to as GTAT) became the absolute focus of the market on Monday (October 6, 2014), and the company's stock price fell by 92.76% in a single day.

All this stems from the bankruptcy protection application filed by GTAT on that day without warning. Some analysts believe that the reason may be related to GTAT's inability to benefit from the agreement with Apple.

"Daily Economic News" reporters yesterday (October 7, 2014) interviewed a number of securities firms and fund industry analysts. Most interviewees thought that sapphire concept stocks would be under pressure, but Apple's expectations of using sapphire screens have not changed. ^[1]

Personal Application for Bankruptcy Protection

In the United States, the Bankruptcy Prevention and Consumer Protection Act came into effect on October 17, 2005.

The bill provides that applicants can apply for bankruptcy in accordance with Chapters 7 and 13 of the Act when they have high debts, such as high medical bills to pay, unemployment, or high credit card debt. Chapter 7 provides that applicants can use part of their property to pay part of their debt, thereby offsetting their entire debt. Chapter 13 of the Bankruptcy Law locks applicants' debts, requiring them to pay off their entire debts as planned within a certain period.

Under the new bill, applicants must obtain a certificate from a "licensed budget and credit consulting non-profit agency" before filing for bankruptcy, stating what services the agency provides to the applicant and what debt it designs Repayment plan. The above certificates must be submitted with the bankruptcy application.

The new bill has created obstacles to Chapter 7 of the previously relatively lax bankruptcy law. If the bankruptcy court finds that an applicant for bankruptcy under Chapter 7 of the Bankruptcy Law will be able to pay its creditors debts in the future, the court will not allow the applicant to continue to apply for bankruptcy under Chapter 7. According to the new bill, if the income is above the national average income (generally based on the average income in the past 6 months) and there is at least $ 100 to cover the daily necessary expenses such as eating, living, minimally wearing, Personal health care and entertainment must be filed for bankruptcy under Chapter 13 of the Bankruptcy Law.

Even if the applicant is eligible to file for bankruptcy in accordance with Chapter 7 of the Bankruptcy Law, certain specific debts cannot be forgiven. For example, student loans are not exempt. Credit debt owed by credit fraud is also not exempt. Applicants must be very careful about the withdrawal of debts after filing an application for bankruptcy. Within 70 days of filing a bankruptcy application, a debt that is more than $ 750 in cash cannot be forgiven. Within 90 days of filing a bankruptcy application, debt owed for spending $ 500 on luxury goods is also not exempt.

To choose a bankruptcy application under Chapter 13 of the Bankruptcy Law, the applicant must submit all financial records and a debt payment plan to the court. The plan is subject to review by the property custodian. Once the new bill goes into effect, the debt payment plan will take longer. It used to take about 3 years, but after October 17, 2005, the bankruptcy applicant's debt repayment time will be as long as 5 years.

Applying for bankruptcy protection

In July 2013, Shengzhi Learning Group filed an application for bankruptcy protection with the US court. The news came to the attention of all parties. How can this publishing company, which claims to be the second largest publisher of higher education textbooks in the United States, come to the step of applying for bankruptcy protection? Will it affect the normal operation of the business? What is the difference between bankruptcy protection and bankruptcy? Around these issues, China News Publishing A reporter from the newspaper recently interviewed Ronald Dunn, chairman of the board of the Sage Learning Group, who came to China to attend cultural events. He listened to the details of the company's application for bankruptcy protection, the latest developments and future plans. "In the United States, applying for bankruptcy protection has different meanings." Ronald Dunn emphasized this at the beginning. He said that in the United States, two chapters on bankruptcy apply to different legal provisions, namely Chapters 7 and 11 of the US Bankruptcy Law. Shengzhi Learning Group applied for Chapter 11 bankruptcy protection, which means that the company's operation is healthy, but it only needs to solve the debt problem. Ronald Dunn emphasized that Shengzhi Learning Group itself has always been profitable, and its liquidity and profit margins are all healthy, but the debt is too high and the profit is not enough to meet the debt and interest repayment. Applying for bankruptcy protection can help the company solve the debt problem through other methods, thereby ensuring that various businesses continue to operate normally and get rid of the fate of being forced to declare bankruptcy. Shengzhi Learning Group's current debt is as high as US $ 5.8 billion, where do these debts come from? As we all know, as early as July 2007, private equity investment companies led by Apax Partners for US $ 7.75 billion Acquired Thomson Learning Group from Thomson Group and changed its name to Sage Learning Group. An Baishen Group raised this money in the name of setting up Shengzhi Learning Group.Therefore, this debt and the interest generated by it are of course assumed by Shengzhi Learning Group. Debt. "From the current situation, the purchase price of $ 7.75 billion is on the high side. But the economic environment in the United States was very good at that time, investors were very optimistic about the economic prospects, and it was easy to borrow money." Ronald Deng En introduced that Anbaishen Group had a "five-year plan" at that time to repay related debts. Judging from the market performance of Shengzhi Learning Group at the time, the plan was feasible, and the group's profit in 5 years was enough to make it pay the interest and principal of the loan. However, the rapidly changing market environment made this plan quickly broken.On the one hand, at the end of the year, the global financial crisis that has affected so far, major customers of Sage Learning Group, such as public libraries, public universities, and primary and secondary schools, have cut their budgets. On the other hand, the rapid development of digital publishing has had a great impact on traditional publishing, and Shengzhi's paper book business is no exception. These factors directly lead to the failure to realize the "five-year plan" ^[2]

How to file for bankruptcy protection

According to the provisions of the Supreme People's Court on Several Issues Concerning the Trial of Bankruptcy Cases of Enterprises, the debtor applying for (being applied for) bankruptcy should have the status of a legal person. Qualified as a subject of bankruptcy. When a state-owned enterprise applies to the people's court for bankruptcy, it shall submit documents in which its superior authority agrees to its bankruptcy; other enterprises shall provide documents from its sponsor or shareholders' meeting to determine the bankruptcy of the enterprise.

The debtor applying for bankruptcy shall submit the following materials to the people's court:

(1) written bankruptcy application;

(2) Certificate of enterprise entity qualification;

(3) List of legal representatives and principals in charge of the enterprise;

(4) The situation of enterprise employees and the resettlement plan;

(5) A written explanation of the losses of the enterprise, together with an audit report;

(6) A detailed list of assets from the enterprise to the date of bankruptcy application, including tangible assets, intangible assets, and investment status of the enterprise;

(7) Details of the account opened by the enterprise in the financial institution, including account opening approval materials, account numbers, funds, etc .;

(8) A statement of the company's claims, stating the name, domicile, amount of debt, time of occurrence, and demand for repayment of the company's debtor;

(9) A statement of corporate debt, stating the name of the creditor, domicile, amount of creditor's rights, and time of occurrence;

(10) the guarantees involved in the enterprise;

(11) the lawsuits that have occurred in the enterprise;

(12) Other materials deemed necessary by the people's court. A creditor who applies for bankruptcy of a debtor shall submit the following materials to the people's court:

(1) the facts and evidence of the occurrence of creditor's rights;

(2) the nature and amount of the creditor's rights, whether there is any guarantee, and evidence attached;

(3) Evidence that the debtor cannot pay off the debts due.