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Maybe it's not a new problem after all

posted by Stephen Lubben

Consider:

Seldom are business bankruptcy cases initiated under Chapters I to VII, inclusive, as well as under Chapters X and XI, where all or substantially all of the assets have not been pledged as collateral for the payment of debts. This pledging of assets tends to create serious questions in connection with the administration of the estates. In cases where the debtor is engaged in business, the receiver or trustee is quite often without free assets with which to carry on operations. There is no money in hand and no means of raising funds necessary to take care of fixed and direct charges essential for the maintenance of the business, without impinging upon the rights of the secured creditors. Debtors who might otherwise be reorganized in the public interest are unable to continue in business long enough to develop alternate means of financing and negotiate accommodations with their creditors.

Charles Seligson, Major Problems for Consideration by the Commission on the Bankruptcy Laws of the United States, 45 Am. Bankr. L.J. 73, 87-88 (1971).

Comments

What is your view on the economic collapse in 2008 due to the housing market crash? Do you feel that it could have been prevented? (Interested college student}

There ought be a procedure whereby the receiver or trustee has enough money to administer the business during insolvency/restructuring procedures. This is the lifeline for business and crucial for its survival. Bashar H. Malkawi

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