With the economy in the poor condition that it is, many businesses and individuals are being forced into financial positions that require them to file for bankruptcy. However, there are five different types of bankruptcy and it is important for a journalist to be familiar with these in order to understand the current condition of their industry, as well as the condition of the rest of the nation.
Primarily large corporations that are insolvent and choose to pay off their debts through a repayment plan file for Chapter 11 bankruptcies. This can more sensibly be called a bankruptcy protection plan because it allows companies to keep their business alive while they pay their creditors over a period of time. This could be a 4-6 month reorganization plan or a 3-5 year plan depending on the financial damage said company is in. Luckily for Star Tribune, an article posted by www.minnpost.com said that experts have agreed that the Stribe has a good chance of surviving bankruptcy.
Other companies that have filed for Chapter 11 in the last year are Sharper Image (Feb. 2008), Circuit City (Nov. 2008), Flying J (Dec. 2008) and many more. One way that companies are surviving involve shutting down stores that have low traffic, laying off employees, and some stores no longer sell or receive gift cards and/or coupons.
Chapter 7 bankruptcies are the type that should start a panic. They are usually used by individuals and do not involve filing a plan of repayment. When an individual files for Chapter 7, the bankruptcy trustee arranges to sell all of the debtor's assets. Usually, larger corporations that cannot overcome their repayment plan when under Chapter 11 may result in Chapter 7 bankruptcy, which usually means that they are going out of business.
Chapter 13 is another type of bankruptcy for individuals thats sets up a 3 to 5 year plan and requires them to pay off taxes, mortgages and car loans in full, but unsecured creditors are usually only paid back a small percentage. This bankruptcy may allow debtors to keep their car or home even if they are in extreme debt.
Chapter 12 is for family farmers and functions much like Chapter 13.
Chapter 9 is a type of bankruptcy available for municipalities and is a form of reorganization, not liquidation.
Bankruptcy is filed for a variety of reasons. The most obvious reason is because people have too much debt and/or not enough money to pay their bills. Due to the poor economy, many businesses have to downsize by laying people off and those that are laid off suffer.
This poor economy is fueling the circle of debt and that is why it is important for journalists to pay attention to what the government, businesses, and individuals are doing to try and get people out of this bankruptcy rut.
You're absolutely right Kori. Most people don't understand the term "bankruptcy," let alone know the different "chapters."
ReplyDeleteAlthough you are correct that the many newspaper companies filing for bankruptcy does not spell the end of the newspaper, I think it would be hard to argue that the future is not grim. A generation of print readers is being replaced with a generation of online readers. Unfortunately, news organizations have not figured out how to turn a significant profit off the web product, and most companies are saddled with debt that goes hand-in-hand with declining stock values.
The bad news? Good journalism is expensive. I hope you (meaning your generation) can help come up with the answers to save the industry.
I think it's worth noting that Circuit City has been unable to find a buyer and is closing all stores(http://www.nytimes.com/2009/01/17/technology/companies/17circuit.html?ref=companies) and Sharper Image is only a brand name now (http://www.nytimes.com/2009/01/19/technology/companies/19sharper.html).
ReplyDeleteOf course that doesn't mean the Star Tribune or any of the other papers filing for bankruptcy protection are doomed to fail, but it’s obvious their current strategy isn’t working.