Commercial Bankruptcies:The Automatic Stay

The items below are excerpted from the Business Bankruptcy News Bulletin. A full issue contains information on dozens of troubled companies, as well as informational and analysis highlights. Please visit the insideARM bookstore for information on subscribing to the Bulletin.

When a debtor files for bankruptcy, whether it be under Chapter 7 or 11 and whether it be a voluntary or involuntary filing, “all entities” are automatically and immediately stayed from taking any action or continuing any legal action against the debtor.  This includes attempts to collect debt from the debtor by any party.  This also applies to the enforcement of liens against the debtor’s property.  This stay also relates to repossession of property.  If the creditor had repossessed property prior to the filing of the case but had disposed of it by sales, the creditor could, and the key word here is “could”, be required to make restitution of that asset to the bankruptcy estate.

Understanding Deadlines When Filing Dischargeability Objections

Rules 4004(b) and 4007(d) of the U.S. Bankruptcy Code state that upon motion of any interested party, after a court hearing on that motion, the court may extend the time to file a complaint objecting to the discharge of a particular debt or to deny the debtor’s discharge. The motion that seeks to extend the deadline must be filed before the original deadline to file a complaint. In those cases where an extension has been granted, the extension applies only to the party that sought it. Thus, when a trustee has obtained an extension of time to file a complaint objecting to discharge, a creditor that hasn’t obtained a similar extension cannot file such a complaint.

Advanta Corp., the Spring House, Pa. firm and formerly one of the largest issuers of credit cards to small business owners in the nation, has seen its board authorize liquidating the company’s assets under a Chapter 11 plan of liquidation.  The company filed for bankruptcy protection two months ago. It should be noted that Advanta Bank Corp. in Utah, the Advanta Corp. unit that issued the credit cards, was not included in the case and is working to return customer deposits. For more information call the court at 302-252-2560.

Advanta Corp., the Spring House, Pa. firm and formerly one of the largest issuers of credit cards to small business owners in the nation, has seen its board authorize liquidating the company’s assets under a Chapter 11 plan of liquidation.  The company filed for bankruptcy protection two months ago. It should be noted that Advanta Bank Corp. in Utah, the Advanta Corp. unit that issued the credit cards, was not included in the case and is working to return customer deposits. For more information call the court at 302-252-2560.

Haights Cross Communications Inc., the White Plains, N.Y. educational publisher which recently filed bankruptcy under a prepackaged Chapter 11 plan along with four of its affiliates, is hoping to trim its debt by up to $200 million. The filing of the plan, which was approved beforehand by its lenders, was made in the U.S. Bankruptcy Court in Delaware, listing assets of between $1 million and $10 million, although according to an annual report the firm’s assets were said to be about $243 million. For more information call the court at 302-252-2560.

Hartmarx Corp., the bankrupt Chicago, Il. apparel company, has seen the Pension Benefit Guaranty Corp. take over the defined benefit plan of the company. The plan, which was 47% funded, has a shortfall of nearly $164 million. The plan faced abandonment because the purchasers of Hartmarx’s assets did not assume responsibility for the plan.

Lenox Group, its joint liquidation plan now effective, emerged from Chapter 11. Its reorganization plan calls for an administrator to distribute Lenox’s cash and remaining property.