Delphi is struggling to find investors to allow them to emerge from Chapter 11. Part I
By Rachel Lynn Foley - Kansas City, MO Bankruptcy on Dec 7, 2007 in General Bankruptcy Information, Missouri
Delphi, a supplier to the auto industry filed for Chapter 11 Bankruptcy in 2005 to reorganize their business in an attempt to survive the flailing economy. In a Chapter 11 case the business must propose a Plan to pay off their secured and priority (taxes generally) debts. The unsecured creditors will receive no less than what they would have received in a Chapter 7 or liquidation bankruptcy. This means that the business would have their assets sold by the trustee in order to pay off their debts. So if the unsecured creditors would have received $100 a piece in a Chapter 7 liquidation than they must receive at least $100 in a Chapter 11 Plan and the unsecured creditors have the right to approve or deny the Plan. This is an over simplification of the Chapter 11 process but used simply for illustration.
Recently Delphi has proposed a new Plan to pay its unsecured creditors and emerge from bankruptcy but the unsecured creditors keep objecting because they want more money. The problem that Delphi faces is that the economy is so tight lending is not as available as it once was. So today’s economy is not only affecting the individual person but also the giants of industry.
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