Asian Journal- The Filipino-American Community Newspaper

Circuit City Stores Inc. filed for chapter 11 bankruptcy reorganization this week, following the footsteps of other big retailers, which filed for bankruptcy relief this year. Linen n Things, Steve & Barry’s, Mervyns, Sharper image, Levitz furniture are other nationwide retailers who sought bankruptcy protection earlier this year. Circuit City said in it’s Chapter 11 petition that many of it’s suppliers have concerns about it’s liquidity and ability to pay for merchandise forcing it to seek the protection of a Bankruptcy Court before the crucial holiday season. It is interesting to note that many large businesses, including the companies of Donald Trump which has filed for bankruptcy reorganization several times and as recently as 2004, opt to reorganize itself through bankruptcy to subsequently emerge as a leaner and profitable business enterprise. Even K-Mart went through bankruptcy several years ago. Unlike AIG, the owners of these businesses do not seek a bailout using public funds. What they seek is the Bankruptcy Court’s protection from creditors allowing them to cut their debts and operating expenses so they can be profitable again, to survive. Lehman Brothers, one of the largest and oldest investment banks in America is still doing business right now as a debtor in possession of the business under protection of bankruptcy law since the Feds denied it bail out funds.

General Motors, the largest carmaker in America, has been hemorrhaging cash at the rate of billions of dollars every quarter, recently stated that it would have to seek bankruptcy protection if the government does not bail it out in the next 2 months.

These businesses are really saying that if there is no bail out for them, the only effective method for them to survive is through bankruptcy. Does this seem odd to you? How can bankruptcy help a business survive? Quite simply, bankruptcy law allows businesses to get rid of debt while allowing them to continue operating and doing business so they can be profitable again, so they can survive.

The same is true with individuals. If your personal debt is too high and debt payments are no longer manageable, individuals have to also resort to bankruptcy to reorganize their financial affairs by letting them get rid of their debts while allowing them to keep most if not all of their assets. The other option is to have your rich uncle bail you out by having him pay off all of your debts. But most individuals cannot rely on Uncle Sam to bail them out of their debt problems. So most individuals must rely on bankruptcy law to help them get rid of their debts so they can get a fresh start in life and become productive citizens again.

Just like businesses, individuals can and do make financial mistakes, which saddle them with unwanted debt. For instance, client bought three houses with zero down last year thinking they would go up in value. Each house had two mortgages (80/20). Even if all three houses got foreclosed, client would still owe the second trust deeds on all three houses. The second trust deed for each house was $150,000. So, even if all three houses got foreclosed, client would still owe $450,000. He also owed $60,000 of credit card debt because he used the cards to pay for mortgage payments hoping that the house values would go up at which time he would sell all three houses for a clean profit. But as we all know, that never happened. Client is a professional who has gross income of more than $100,000. What do you think? Should he seek bankruptcy protection to get rid of $510,000 of unsecured debt or should he spend the rest of his life paying of $510,000 of unsecured debt because he made the mistake of buying three houses for investment last year? With a chapter seven bankruptcy he can keep everything he owns and keep his income while discharging all of his unwanted debt.

If you need debt relief, contact my office. I will analyze your case personally.

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Lawrence Bautista Yang specializes in bankruptcy, business, real estate and civil litigation and has successfully represented more than five thousand clients in California. Please call Angie, Barbara or Jess at (626) 284-1142 for an appointment at 1000 S. Fremont Ave., Bldg. A-1 Suite 1125 Unit 58, Alhambra, CA 91803.

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