Last week General Motors (GM) emerged from bankruptcy protection – more quickly than was expected – as a leaner company with cleansed debts and less burdensome contracts that would have not have allowed it to be competitive. The bankruptcy process of only 40 days exceeded even the expectations of President Obama who had predicted that GM would spend 60 to 90 days in bankruptcy protection.
Since the filing of bankruptcy protection on June 1, 2009 GM has already reduced its debt by more than $40 billion. It has closed some of its factories. Laid-off many of its workers. Sold some of its car brands. Terminated contracts with many of its dealerships across the country. Its best assets, including the Chevrolet, Cadillac, Buick and GMC brands, were formally transferred to the “new” GM which will now move forward and continue to operate as GM.
The “new” GM will now be owned 61 percent by the US government. The remaining ownership has been allocated mostly as shares of the Canadian government and the United Auto Workers.
If a very big and complex company such as GM can file for and emerge from bankruptcy within 40 days.. Can an individual Juan dela Cruz take advantage of the same protection and remedies available in bankruptcy court and expect the same result?
The 40 days that it took for GM to emerge from bankruptcy was indeed a very impressive short period of time to emerge from bankruptcy. But that would not necessarily be surprising considering that billions of dollars were involved affecting thousands of workers, not to mention the national interest spotlight that was put on this case thus forcing all parties from judges, to attorneys to creditors and shareholders to work at a very fast pace. In almost all cases, a filing by individual Juan dela Cruz in bankruptcy court would probably take a few months longer before he can emerge from bankruptcy court.
Other than the 40-day period to emerge from bankruptcy, will individual Juan dela Cruz be able to expect the same result as GM in emerging from bankruptcy with reduced debts and obligations?
The short answer is “yes”. The main purpose of bankruptcy protection, whether it is GM or an individual Juan dela Cruz, is to relieve that person of debts and obligations they can no longer afford. Bankruptcy has allowed GM to shed its debts and will now allow GM to continue operations as a business that can hopefully survive this severe economic downturn. The same remedies and protections available to GM are also available to individuals. Bankruptcy for individuals who are in financial trouble, will also allow individuals to shed debts they can no longer afford thus allowing them to also continue to viably exist financially.
The lesson to be learned from the GM filing is that the bankruptcy process was used to preserve a company, not to destroy it. The US government, unions, creditors and shareholders have all worked together to reach a deal that allowed GM to emerge from bankruptcy and continue to operate as a business. The bankruptcy process was used to save this American icon. Hopefully this has shown us that the filing of bankruptcy should not carry a stigma. It is not a shameful process. Bankruptcy is a legal process enacted by Congress to allow companies to continue to operate in an orderly way. This gives viable companies a second chance in business. Individual Juan dela Cruz has that second chance available too.
(DISCLAIMER: material presented above is intended for informational purposes only. It is not intended as professional advice and should not be construed as such. Rey Tancinco is a partner at Tancinco Law Offices, a professional corporation with offices in San Francisco, Vallejo, and Manila. The law office website is at: tancinco.weareph.com/old. Rey Tancinco can be contacted at (800) 999-9096 or (415) 397-0808 or via email at: attyrey@tancinco.com.)
