  _sj_ Member Username: _sj_ Post Number: 2784 Registered: 12-2003 |
quote: Compared to the billions upon billions that have been given to the big three already in taxbreaks, eliminating competition, and not putting in place real environment standards. | ||
Frankg Member Username: Frankg Post Number: 704 Registered: 08-2007 |
Autoworkers around the world have job security provisions. When GM approached the UAW to become more like the Japanese back in the mid 1980's, GM offered the JOBS Bank as a way to be more like the Japanese. But look around - Germany, Japan, Korea - those workers all have job security provisions like the JOBS Bank. And Toyota does it over here, too. It builds commitment among employees, and encourages them to invest in firm-specific skills. | ||
_sj_ Member Username: _sj_ Post Number: 2786 Registered: 12-2003 |
The only thing they have in common is a title. | ||
Grantsmom Member Username: Grantsmom Post Number: 6 Registered: 10-2003 |
For those (like sj) who wrote about the union workers being part of the problem -- I want to talk to you! I'm doing a story for NPR about people who blame the unions (and the union members' response). Email me please at cheadlee@npr.org. Thank you!! | ||
3rdworldcity Member Username: 3rdworldcity Post Number: 1450 Registered: 01-2005 |
Danindc: You state that 2/3 of all corporations do not pay any taxes. Now, I'm sure you are aware that your statement is grossly misleading and you're made the statement to influence people on here who you deem to be pretty stupid, to support your own misguided views on taxation. I don't know the percentage but I feel safe in stating that most corporations are sub-S , PC's and other corporations that are NOT TAXED at the corporate level; income is attributed to the members and shareholders who are the ones who pay the taxes. (You probably think that double taxation of corporations and their shareholders is a good thing.) Then there are of course the large percentage of corporations which don't pay federal taxes BECAUSE THEY DON'T MAKE ANY PROFIT IN A GIVEN YEAR. There are 1000s of those although I don't know the percentage. Just look at the corporate bankruptcy rates. So, unless you are more dense than I think you are, you've put out some serious misinformation and you ought to post a retraction. | ||
Danindc Member Username: Danindc Post Number: 5242 Registered: 10-2003 |
quote: A corporation is a corporation. S-corporations are not corporations. Partnerships and LLCs are not corporations. Sole proprietorships are not corporations. quote: And there are also corporations who abuse offshore tax havens, utilize tax shelters, and depreciate the shit out of every asset they have. Like you, I don't know the percentages, but God dammit, I'm righter than you are because I say so. Nyah nyah. quote: Maybe you shouldn't ever buy anything, then, since sales taxes are assessed on income that has already been taxed. You know what happens with the money a retailer makes from the money you spend? They get taxed on it too! That's like, quintuple taxation or something. My goodness, where does the madness end??? | ||
3rdworldcity Member Username: 3rdworldcity Post Number: 1452 Registered: 01-2005 |
"Where does the madness end?" When you get some professional help. Sub-S corporations ARE "corporations." I made no reference to partnerships; do you think I did? Sales taxes are "assessed" (your word, not mine) on income that's already been taxed? I hope you're not talking about corporate income, which is the topic here. If so, wrong again. You claim there are offshore tax abuses. You're probably right, but the number is negligible and they usually get caught and penalized heavily. (That's based on my own experience as a lawyer.) Since when are "tax shelters" wrong? They are usually used to defer taxes from one year to another. They are perfectly legal if not abused. If you own a house, your mtg interest is deductible under most circumstances and that's a "tax shelter." My income is heavily sheltered by depreciation and depletion allowances; if I sell my oil interests I pay depreciation, and in some cases, depletion recapture. The oil business is the riskiest in the country and if those historical and well reasoned "shelters" weren't in place, nobody would be dumb enough or greedy enough to be in that business. And, you and everyone else would be walking everywhere (which some on here would love, I know.) You say corps "depreciate the shit out of every asset they have." My my, I sense a bit of envy here, by a guy who has no depreciable assets. Depreciation (for individuals, corporations and every other type of business) is a process strictly governed by the Tax Code and is grounded in basic financial principles. Over-depreciate and you go to jail or pay heavy penalties. And, of course, when an asset is sold depreciation is recaptured, so all that money is taxed at the time, at the rate then in effect, which can be much more than the rate in effect at the time depreciation was taken. It's clear you have no business experience and and little knowledge if any of taxation or corporations. You shouldn't be posting as if you do. | ||
Danindc Member Username: Danindc Post Number: 5243 Registered: 10-2003 |
Seems like some people have to make everything personal, don't they? The point is, if you take away depreciation, deductions, tax shelters, and the like, you can then lower corporate tax rates to say, the level of an Ireland. As it stands, U.S. corporations pay comparable effective tax rates to other G-8 nations. And, as I stated above, U.S. corporations pay far lower taxes with respect to GDP than the much-ballyhooed Ireland. Never mind that we're a geographically vast nation of over 300 million people, compared to an isolated island of 4.2 million. S Corporations are NOT taxed the same as Corporations. From the IRS: quote: And yes, Corporations, business of other incorporation status and consumers all pay sales taxes on income that has already been taxed. Tell me your office has never purchased anything. | ||
_sj_ Member Username: _sj_ Post Number: 2797 Registered: 12-2003 |
quote: The workers are not the issue nor the problem. It is the culture we as a society have created. The selfish, arrogant and irresponsible society we have created is the real problem. Now it does permeate throughout the car companies from the top to the bottom and into the UAW. | ||
Spartacus Member Username: Spartacus Post Number: 337 Registered: 07-2005 |
Dan, Time and time again I have read posts from you where you have chastised lay people for delving into any topic related to architecture (or mass transit- which I gather is some sort of hobby of yours). You love to let everyone know how smart you are in those areas. You may want to consider how silly those people sound to you when they talk about a subject that you're familiar with before you start opining about a topic you are so clearly unfamiliar with. | ||
Danindc Member Username: Danindc Post Number: 5244 Registered: 10-2003 |
quote: Did I post anything factually incorrect? Maybe you should be scrutinizing IDEAS, and not the personalities you perceive are behind them. | ||
Reuel Member Username: Reuel Post Number: 13 Registered: 11-2008 |
quote:Yes, when you posted "S-corporations are not corporations. Partnerships and LLCs are not corporations." Corporations that elect Subchapter S and Limited Liability Corporations are certainly corporations as any law student or business person could attest. | ||
Danny Member Username: Danny Post Number: 7946 Registered: 02-2004 |
Let's see what made the the Big Three crying to the govt for some money Let's look a quick summary from its past. Mid 1970s: The OPEC oil crisis cause a oil embargo to any one who supported Israel, including the United States. Late 1970s: Japanese auto makers like Toyota, Honda, Hyundai and Mitsubishi started to make fuel efficient cars. Late 1970s: The Big Four Ford, Chrysler, GM and AMC kept on making gaz guzzlers and that not worth selling in the market most of the new models were left in the "car bank" ( a very big parking lot) Chrysler Corp. was going broke fast. 1979: The Chrysler Loan Guarantee Act was passed actually in January of 1980 to have its suppliers to pay Chrysler some comission money. If Chrysler goes bankrupt, Then the gov't will pay them back. If Chrysler succeeds it would pay the comission money back to thier suppliers. 1983: The plan worked for Chrysler due the booming sales of the new mini-van The Caravan for Hockey and Soccer Moms. Chrysler Corp payed the comission money back to its suppliers and still have enough money to spend. Mid 1980s Ford, GM and AMC still struggling to sell cars. AMC is going bankrupt if they sell more cars. March 2, 1987- AMC decided to merge with Chrysler AMC is no more. Now we have the Big Three. 1988: GM cars sales were finally in the good profitability that GM's CEO Roger Smith decided to close down 3 plants in Flint, open the 3 new ones in Mexico for cheap labor, Then tell the UAW that their broke (LIE LIE LIE!) and offer of some buyouts to auto union workers. Some took it ans some didn't. The result: Flint become a instant premature ghost town, more vacant areas, people moving out, families and friends left behind to cope with the lay-offs. Homes in Flint neighborhoods went to foreclosures, People in Flint lost their minds that they would scavage any scraps that they could find. Businesses gone overnight. Crime and violence is rampant and more rabie carrying rats filling the void of vacant homes then people. Back than There more rats in the flint then people. Early 1990s Profitabilities of Big Three is stagerant. Mid 1990s: Profits of the Big Three is starting to go down fast. Resulting of more plant closures Benz came in to buy Chrysler. 1998: The Big Three haven't made a decent profit, more layoffs loomed. Daimler AG came in to merge with Benz and Chrysler and became Daimler-Chrysler. 2000: The Big Three is losing profits fast. Sharehorders are clueless of how to sell their cars. 2001: George Bush in first term in office proposed Free Trade Policies to increase the ecomony. The Automobile industry is officially a international market. Meanwhile Toyota, Honda, Hyundai, Mitsubishi and Daewoo enjoy record profits while the Big Three LOSE. At least Ford is doing well in Europe and GM is doing well in China in car sales. 2002: The Big Three is dire straits, no good profits in America, more lay-offs, plan closures, planet idiling, its suppliers have to lay-off people and most union workers took buy-outs. 2005: The Big Three must answer to their economic problems fast so they introduce employee discounts to customers. It worked most of the models were sold quick over the summer. Then they stop it in the fall. 2008: The Big Three is still losing profits, Daimler AG and Benz say F*&@ to Chrysler and left Ceberus brought the corp over the summer. Toyota in the meantime is enjoying record car sales, may top GM as the number one car corporation. Then the Wall Street blowout, The October Curse. GM wants to merge with GM, but the gov's say HELL NO! Now the Big Three is going to be bankrupt after Christmas and their ONLY hope to survive the next year is ask the Gov't for $25 Million dollars in bailout money. Chrysler Execs in the meantime have recieve bonuses. They would make gov't mad. Now The all the Big three had gone to Washington D.C. to lobby for the bailout money. If they don't get the money The Big Three would have to file for Chapter 11 bankruptcy and shut down more plants resulting of 2.5 million U.S. jobs GONE! by 2009 and if they one or all the Big Three can't re-organize or downsize their company it would have to shut down. Thus leaving Detroit the suburbs into a sudden ghost town by 2015. We Americans made automobile market in perfection. Can afford to lose it against the Japanese and the Europeans. SAVE THE BIG THREE from becoming extinct like the dinosaurs. Buy American! | ||
Danindc Member Username: Danindc Post Number: 5245 Registered: 10-2003 |
Reuel, Corporations that elect Subchapter S and Limited Liability Corporations are structured and taxed differently as any law student or business person could attest. What?--just because it uses the word "corporation", it's the same thing? Show me an LLC or S-corporation subject to the 35% corporate tax rate. | ||
Spartacus Member Username: Spartacus Post Number: 338 Registered: 07-2005 |
Dan: Your comments were a mixture of grossly misleading and factually inaccurate. You said that S corps weren't corporations, this is factually inaccurate, as was pointed out above. You are right, in that they are taxed differently, but that was the whole point of 3rd world's post. You do not seem to have any understanding at all about how depreciation works- or even what it means. Are you suggesting that Irish corporations cannot get a deduction for the purchase of capital assets? Ireland, like the U.S. taxes corporations on their profits. Absent the concept of depreciation, corporations would deduct 100% of their business expenses in the year incurred. The idea behind depreciation is that your deduction must correspond to the useful life of the good that was purchased. In the end, none of this has any bearing on the tax rate, simply on the timing of when the tax is paid. You seem to be suggesting that U.S. corps are using depreciation as some sort of loop hole to avoid tax- and that this "loop hole" is not available in other countries. It may be that you can accelerate your depreciation faster in the U.S. in certain circumstances, but the total tax paid over time will eventually be a wash, it is just a matter of timing. You also use some B.S. statistic about corporate taxes as a percentage of GDP. This is completely bogus. If Ireland's corporate profits make up a larger portion of their GDP (which is undoubtably the case) then it stands to reason that the total taxes will be a higher percentage of GDP. To suggest that this is evidence that their actual tax rates are lower is disingenious. Your sales tax comment is wrong. Corporation's get to deduct their expenses. Sales tax is an expense. I'm not sure what your point is, but I think that you're trying to say that tax rates in Ireland aren't really lower than the U.S. This is demonstrably false. I didn't want to get into a point by point critique of your posts because I didn't want to threadjack this thread. You're certainly not the only poster to spout off on topics that you don't know much about, but I couldn't bear to stand by in light of your frequent harsh criticism of anyone that disagrees with you. | ||
Danindc Member Username: Danindc Post Number: 5246 Registered: 10-2003 |
quote: Allow me to clarify. For purposes of this thread, I understood "corporation" to refer to C-corporations, since the discussion was regarding corporate tax rates, specifically, the "35% corporate tax rate". I am not an expert on Irish tax law. But I do know that with a far lower overall tax rate, Irish companies are paying a higher percentage of GDP in taxes. Recall that GDP is the sum value of all goods and services produced. In other words, the percentage of taxes paid on actual revenues is higher in Ireland than it is in the U.S., or as some would call it, a higher effective rate of taxation. quote: A deduction is not the same as "non-existent". Sales taxes are paid to states. Just because a business can deduct it as an expense on federal tax forms--just as a person can deduct state income tax on his 1040--doesn't mean the sales tax wasn't paid to the state. | ||
Spartacus Member Username: Spartacus Post Number: 339 Registered: 07-2005 |
1) 3rdworld's point was very simple. He was responding to your statement that that 2/3rds of all corporations don't pay any tax. He was simply pointing out that a large number of corporations do not pay any tax because they have elected Subchapter S treatment. His point was that this fact made your statistic misleading. Since I don't know where you got your statistic from I have no idea if the number was confined to C corporations. I'm not sure any of this is relevant to the discussion-- I referenced it simply to point out a factual error on your part. 2) GDP does not equal corporate profits. GDP does not equal corporate revenues. You can't draw any inferences about effective corporate tax rates from this statistic. 3) If sales taxes are deductible they are not an example of double taxation. I'm not sure who argued that they were "non-existent". | ||
Detmuscle Member Username: Detmuscle Post Number: 22 Registered: 02-2008 |
Did anybody catch this heated debate on CNBC? http://video.msn.com/video.asp x/?mkt=en-us&brand=money&vid=b 7bef416-e21c-4872-a16e-24f991c 681c9&playlist=videoByTag:tag: money_top_investing:ns:MSNmone y_Gallery:mk:us:vs:1&from=MSNm oney_GOPToDetroitDropDead&tab= s216&wa=wsignin1.0 | ||
Bratt Member Username: Bratt Post Number: 780 Registered: 01-2004 |
Actually, I was wondering how long automobile companies would really last. I have several people in my family who work on the line. They average $85,000 to $100,000 a year. For many years, they had benefits that you could not get at any other company. No co-pays, $3.00 prescriptions, help with your children's college tuition, the ultimate summer picnics, and so on. And if you worked in management, the perks were unbelievable! Company car, adoption assistance, etc. I knew a guy who worked in management, and he would give me cars to drive for months at a time if I wanted them, and begged me to keep getting them and I didin't even work for them. It all had to end at some point. The world is changing and the economy is changing. And what would $25 billion do for companies as large as they are anyway? Not much. | ||
Angry_dad Member Username: Angry_dad Post Number: 272 Registered: 02-2006 |
"Actually, I was wondering how long automobile companies would really last. I have several people in my family who work on the line. They average $85,000 to $100,000 a year. For many years, they had benefits that you could not get at any other company. No co-pays, $3.00 prescriptions, help with your children's college tuition, the ultimate summer picnics, and so on. And if you worked in management, the perks were unbelievable! Company car, adoption assistance, etc. I knew a guy who worked in management, and he would give me cars to drive for months at a time if I wanted them, and begged me to keep getting them and I didin't even work for them." Is that going on now? How many hours did these people work to get the amounts you talk about? The real story is those days are over. GM Ford & Chrysler know it. But the stories will go on. BTW, the real issue isn't the "bailout". In case you haven't noticed, it is really about the cost of credit. Thanks to the ineptness of both political parties, they watched and profited as capital & jobs left the states. It is impossible to invest in American as an American corporation unless you have a market that is shielded from the currency manipulation and social policies of abroad. Yes Japan and China have sucked the cash out of the nation, all they had to do was go to DC first and get a good PR crew. | ||
Savannah Member Username: Savannah Post Number: 79 Registered: 02-2008 |
I remember when the states had to pass lemon laws to protect the same people these bloodsuckers(Union thugs and mismagement)from completely screwing.Now these same consumers are expected to pay for this 3 ring circus.Let 'em go! | ||
Thames Member Username: Thames Post Number: 303 Registered: 02-2007 |
I say, just loan them the money. It's not a new idea, it's been done before; with good results, I should add. It's a gamble but worth trying. There should be stipulations regarding bonuses and all that rot. AIG taught us, in no time, that we must have stipulations. Everybody in DC that is posturing about this measly amount needs to change gears and go after AIG. AIG is laughing all the way to the bank. Within a week of each time they've been given money, they took off for the next resort destination or golf outing or whatever. And Paulson just keeps giving them more! W.T.F? I was so disgusted with the AIG story that I had to stop watching how much money they were getting, it was making me sick. However, I do know that their first installment alone was well over $25 billion. $25 billion for these three companies is not a big deal, especially these days. The idiots are barking up the wrong tree. | ||
Xd_brklyn Member Username: Xd_brklyn Post Number: 454 Registered: 10-2003 |
Detmuscle, thanks for the link. For what's worth, am definitely for the loan and bailout. Let's hope it works. There will be little support for sustained payments like the subsidies we provide for agriculture. | ||
Savannah Member Username: Savannah Post Number: 81 Registered: 02-2008 |
I feel about this exactly as I feel about the "poor family farmer" down here in Ga. It's a racket! They get WELFARE from the government to not grow things. if a way of life is not viable,it needs to go away.Del Monte seems to be able to grow some veggies that the poor family farmer can't not grow without help from the government. | ||
3rdworldcity Member Username: 3rdworldcity Post Number: 1453 Registered: 01-2005 |
Thanks Reuel. Thanks Spartacus. Your explanation was clear, concise and understandable even by laymen. Much better job than I was able to do. Wonder if it got through. | ||
Detroitrise Member Username: Detroitrise Post Number: 3928 Registered: 09-2007 |
Heck, losing the Big 3 may kill that "Detroit Come Back Dream".  If it weren't for GM, downtown Detroit would be in worse shape than it is today. | ||
Lilpup Member Username: Lilpup Post Number: 5651 Registered: 06-2004 |
Losing the Big 3 will turn this place into a Great Lakes version of the wide open Wild West. | ||
_sj_ Member Username: _sj_ Post Number: 2800 Registered: 12-2003 |
Did you watch the interviews after where they interviewed a UAW shop steward. The steward in so many words criticized one state(can't remember which one) for not backing the bailout and how it would effect them and how they bent over backwards for foreign car companies. They showed a graph that showed the amount of Ford Employees in the state at 0, while the others employed thousands. The next interview was a man on the streets of the Detroit who said that Car Manufacturing is all that we manufacture anymore(remember this argument Lilpup) and that the 5 Million Autoworkers make up the majority of taxes paid in this country. | ||
Pffft Member Username: Pffft Post Number: 1810 Registered: 12-2003 |
sj, Those states DO bend over backwards for the foreign automakers, the same Republican senators bleating about how Detroit must die, are the ones who are deepest in the pocket of the foreign autos who built non-union plants in their states thanks to the big $$$$ offered. | ||
Danny Member Username: Danny Post Number: 7947 Registered: 02-2004 |
If the Big Three didn't get the bailout money. All of them would have to file for Chapter 11 bankruptcy. When they do, they would have to go these processes: Background A case filed under chapter 11 of the United States Bankruptcy Code is frequently referred to as a "reorganization" bankruptcy. An individual cannot file under chapter 11 or any other chapter if, during the preceding 180 days, a prior bankruptcy petition was dismissed due to the debtor's willful failure to appear before the court or comply with orders of the court, or was voluntarily dismissed after creditors sought relief from the bankruptcy court to recover property upon which they hold liens. 11 U.S.C. §§ 109(g), 362(d)-(e). In addition, no individual may be a debtor under chapter 11 or any chapter of the Bankruptcy Code unless he or she has, within 180 days before filing, received credit counseling from an approved credit counseling agency either in an individual or group briefing. 11 U.S.C. §§ 109, 111. There are exceptions in emergency situations or where the U.S. trustee (or bankruptcy administrator) has determined that there are insufficient approved agencies to provide the required counseling. If a debt management plan is developed during required credit counseling, it must be filed with the court. How Chapter 11 Works A chapter 11 case begins with the filing of a petition with the bankruptcy court serving the area where the debtor has a domicile or residence. A petition may be a voluntary petition, which is filed by the debtor, or it may be an involuntary petition, which is filed by creditors that meet certain requirements. 11 U.S.C. §§ 301, 303. A voluntary petition must adhere to the format of Form 1 of the Official Forms prescribed by the Judicial Conference of the United States. Unless the court orders otherwise, the debtor also must file with the court: (1) schedules of assets and liabilities; (2) a schedule of current income and expenditures; (3) a schedule of executory contracts and unexpired leases; and (4) a statement of financial affairs. Fed. R. Bankr. P. 1007(b). If the debtor is an individual (or husband and wife), there are additional document filing requirements. Such debtors must file: a certificate of credit counseling and a copy of any debt repayment plan developed through credit counseling; evidence of payment from employers, if any, received 60 days before filing; a statement of monthly net income and any anticipated increase in income or expenses after filing; and a record of any interest the debtor has in federal or state qualified education or tuition accounts.11 U.S.C. § 521. A husband and wife may file a joint petition or individual petitions. 11 U.S.C. § 302(a). (The Official Forms are not available from the court, but may be purchased at legal stationery stores or downloaded from the Internet at www.uscourts.gov/bkforms/index .html.) The courts are required to charge an $1,000 case filing fee and a $39 miscellaneous administrative fee. The fees must be paid to the clerk of the court upon filing or may, with the court's permission, be paid by individual debtors in installments. 28 U.S.C. § 1930(a); Fed. R. Bankr. P. 1006(b); Bankruptcy Court Miscellaneous Fee Schedule, Item 8. Fed. R. Bankr. P. 1006(b) limits to four the number of installments for the filing fee. The final installment must be paid not later than 120 days after filing the petition. For cause shown, the court may extend the time of any installment, provided that the last installment is paid not later than 180 days after the filing of the petition. Fed. R. Bankr. P. 1006(b). The $39 administrative fee may be paid in installments in the same manner as the filing fee. If a joint petition is filed, only one filing fee and one administrative fee are charged. Debtors should be aware that failure to pay these fees may result in dismissal of the case. 11 U.S.C. § 1112(b)(10). The voluntary petition will include standard information concerning the debtor's name(s), social security number or tax identification number, residence, location of principal assets (if a business), the debtor's plan or intention to file a plan, and a request for relief under the appropriate chapter of the Bankruptcy Code. Upon filing a voluntary petition for relief under chapter 11 or, in an involuntary case, the entry of an order for relief, the debtor automatically assumes an additional identity as the "debtor in possession." 11 U.S.C. § 1101. The term refers to a debtor that keeps possession and control of its assets while undergoing a reorganization under chapter 11, without the appointment of a case trustee. A debtor will remain a debtor in possession until the debtor's plan of reorganization is confirmed, the debtor's case is dismissed or converted to chapter 7, or a chapter 11 trustee is appointed. The appointment or election of a trustee occurs only in a small number of cases. Generally, the debtor, as "debtor in possession," operates the business and performs many of the functions that a trustee performs in cases under other chapters. 11 U.S.C. § 1107(a). Generally, a written disclosure statement and a plan of reorganization must be filed with the court. 11 U.S.C. §§ 1121, 1125. The disclosure statement is a document that must contain information concerning the assets, liabilities, and business affairs of the debtor sufficient to enable a creditor to make an informed judgment about the debtor's plan of reorganization. 11 U.S.C. § 1125. The information required is governed by judicial discretion and the circumstances of the case. In a "small business case" (discussed below) the debtor may not need to file a separate disclosure statement if the court determines that adequate information is contained in the plan. 11 U.S.C. § 1125(f). The contents of the plan must include a classification of claims and must specify how each class of claims will be treated under the plan. 11 U.S.C. § 1123. Creditors whose claims are "impaired," i.e., those whose contractual rights are to be modified or who will be paid less than the full value of their claims under the plan, vote on the plan by ballot. 11 U.S.C. § 1126. After the disclosure statement is approved by the court and the ballots are collected and tallied, the court will conduct a confirmation hearing to determine whether to confirm the plan.11 U.S.C. § 1128. In the case of individuals, chapter 11 bears some similarities to chapter 13. For example, property of the estate for an individual debtor includes the debtor's earnings and property acquired by the debtor after filing until the case is closed, dismissed or converted; funding of the plan may be from the debtor's future earnings; and the plan cannot be confirmed over a creditor's objection without committing all of the debtor's disposable income over five years unless the plan pays the claim in full, with interest, over a shorter period of time. 11 U.S.C. §§ 1115, 1123(a)(8), 1129(a)(15). The Chapter 11 Debtor in Possession Chapter 11 is typically used to reorganize a business, which may be a corporation, sole proprietorship, or partnership. A corporation exists separate and apart from its owners, the stockholders. The chapter 11 bankruptcy case of a corporation (corporation as debtor) does not put the personal assets of the stockholders at risk other than the value of their investment in the company's stock. A sole proprietorship (owner as debtor), on the other hand, does not have an identity separate and distinct from its owner(s). Accordingly, a bankruptcy case involving a sole proprietorship includes both the business and personal assets of the owners-debtors. Like a corporation, a partnership exists separate and apart from its partners. In a partnership bankruptcy case (partnership as debtor), however, the partners' personal assets may, in some cases, be used to pay creditors in the bankruptcy case or the partners, themselves, may be forced to file for bankruptcy protection. Section 1107 of the Bankruptcy Code places the debtor in possession in the position of a fiduciary, with the rights and powers of a chapter 11 trustee, and it requires the debtor to perform of all but the investigative functions and duties of a trustee. These duties, set forth in the Bankruptcy Code and Federal Rules of Bankruptcy Procedure, include accounting for property, examining and objecting to claims, and filing informational reports as required by the court and the U.S. trustee or bankruptcy administrator (discussed below), such as monthly operating reports. 11 U.S.C. §§ 1106, 1107; Fed. R. Bankr. P. 2015(a). The debtor in possession also has many of the other powers and duties of a trustee, including the right, with the court's approval, to employ attorneys, accountants, appraisers, auctioneers, or other professional persons to assist the debtor during its bankruptcy case. Other responsibilities include filing tax returns and reports which are either necessary or ordered by the court after confirmation, such as a final accounting. The U.S. trustee is responsible for monitoring the compliance of the debtor in possession with the reporting requirements. Railroad reorganizations have specific requirements under subsection IV of chapter 11, which will not be addressed here. In addition, stock and commodity brokers are prohibited from filing under chapter 11 and are restricted to chapter 7. 11 U.S.C. § 109(d). The U.S. trustee or bankruptcy administrator The U.S. trustee plays a major role in monitoring the progress of a chapter 11 case and supervising its administration. The U.S. trustee is responsible for monitoring the debtor in possession's operation of the business and the submission of operating reports and fees. Additionally, the U.S. trustee monitors applications for compensation and reimbursement by professionals, plans and disclosure statements filed with the court, and creditors' committees. The U.S. trustee conducts a meeting of the creditors, often referred to as the "section 341 meeting," in a chapter 11 case. 11 U.S.C. § 341. The U.S. trustee and creditors may question the debtor under oath at the section 341 meeting concerning the debtor's acts, conduct, property, and the administration of the case. The U.S. trustee also imposes certain requirements on the debtor in possession concerning matters such as reporting its monthly income and operating expenses, establishing new bank accounts, and paying current employee withholding and other taxes. By law, the debtor in possession must pay a quarterly fee to the U.S. trustee for each quarter of a year until the case is converted or dismissed. 28 U.S.C. § 1930(a)(6). The amount of the fee, which may range from $250 to $10,000, depends on the amount of the debtor's disbursements during each quarter. Should a debtor in possession fail to comply with the reporting requirements of the U.S. trustee or orders of the bankruptcy court, or fail to take the appropriate steps to bring the case to confirmation, the U.S. trustee may file a motion with the court to have the debtor's chapter 11 case converted to another chapter of the Bankruptcy Code or to have the case dismissed. In North Carolina and Alabama, bankruptcy administrators perform similar functions that U.S. trustees perform in the remaining forty-eight states. The bankruptcy administrator program is administered by the Administrative Office of the United States Courts, while the U.S. trustee program is administered by the Department of Justice. For purposes of this publication, references to U.S. trustees are also applicable to bankruptcy administrators. Creditors' Committees Creditors' committees can play a major role in chapter 11 cases. The committee is appointed by the U.S. trustee and ordinarily consists of unsecured creditors who hold the seven largest unsecured claims against the debtor. 11 U.S.C. § 1102. Among other things, the committee: consults with the debtor in possession on administration of the case; investigates the debtor's conduct and operation of the business; and participates in formulating a plan. 11 U.S.C. § 1103. A creditors' committee may, with the court's approval, hire an attorney or other professionals to assist in the performance of the committee's duties. A creditors' committee can be an important safeguard to the proper management of the business by the debtor in possession. The Small Business Case and the Small Business Debtor In some smaller cases the U.S. trustee may be unable to find creditors willing to serve on a creditors' committee, or the committee may not be actively involved in the case. The Bankruptcy Code addresses this issue by treating a "small business case" somewhat differently than a regular bankruptcy case. A small business case is defined as a case with a "small business debtor." 11 U.S.C. § 101(51C). Determination of whether a debtor is a "small business debtor" requires application of a two-part test. First, the debtor must be engaged in commercial or business activities (other than primarily owning or operating real property) with total non-contingent liquidated secured and unsecured debts of $2,190,000 or less. Second, the debtor's case must be one in which the U.S. trustee has not appointed a creditors' committee, or the court has determined the creditors' committee is insufficiently active and representative to provide oversight of the debtor. 11 U.S.C. § 101(51D). In a small business case, the debtor in possession must, among other things, attach the most recently prepared balance sheet, statement of operations, cash-flow statement and most recently filed tax return to the petition or provide a statement under oath explaining the absence of such documents and must attend court and the U.S. trustee meeting through senior management personnel and counsel. The small business debtor must make ongoing filings with the court concerning its profitability and projected cash receipts and disbursements, and must report whether it is in compliance with the Bankruptcy Code and the Federal Rules of Bankruptcy Procedure and whether it has paid its taxes and filed its tax returns. 11 U.S.C. §§ 308, 1116. In contrast to other chapter 11 debtors, the small business debtor is subject to additional oversight by the U.S. trustee. Early in the case, the small business debtor must attend an "initial interview" with the U.S. trustee at which time the U.S. trustee will evaluate the debtor's viability, inquire about the debtor's business plan, and explain certain debtor obligations including the debtor's responsibility to file various reports. 28 U.S.C. § 586(a)(7). The U.S. trustee will also monitor the activities of the small business debtor during the case to identify as promptly as possible whether the debtor will be unable to confirm a plan. Because certain filing deadlines are different and extensions are more difficult to obtain, a case designated as a small business case normally proceeds more quickly than other chapter 11 cases. For example, only the debtor may file a plan during the first 180 days of a small business case. 11 U.S.C. § 1121(e). This "exclusivity period" may be extended by the court, but only to 300 days, and only if the debtor demonstrates by a preponderance of the evidence that the court will confirm a plan within a reasonable period of time. When the case is not a small business case, however, the court may extend the exclusivity period "for cause" up to 18 months. The Single Asset Real Estate Debtor Single asset real estate debtors are subject to special provisions of the Bankruptcy Code. The term "single asset real estate" is defined as "a single property or project, other than residential real property with fewer than four residential units, which generates substantially all of the gross income of a debtor who is not a family farmer and on which no substantial business is being conducted by a debtor other than the business of operating the real property and activities incidental." 11 U.S.C. § 101(51B). The Bankruptcy Code provides circumstances under which creditors of a single asset real estate debtor may obtain relief from the automatic stay which are not available to creditors in ordinary bankruptcy cases. 11 U.S.C. § 362(d). On request of a creditor with a claim secured by the single asset real estate and after notice and a hearing, the court will grant relief from the automatic stay to the creditor unless the debtor files a feasible plan of reorganization or begins making interest payments to the creditor within 90 days from the date of the filing of the case, or within 30 days of the court's determination that the case is a single asset real estate case. The interest payments must be equal to the non-default contract interest rate on the value of the creditor's interest in the real estate. 11 U.S.C. § 362(d)(3). Appointment or Election of a Case Trustee Although the appointment of a case trustee is a rarity in a chapter 11 case, a party in interest or the U.S. trustee can request the appointment of a case trustee or examiner at any time prior to confirmation in a chapter 11 case. The court, on motion by a party in interest or the U.S. trustee and after notice and hearing, shall order the appointment of a case trustee for cause, including fraud, dishonesty, incompetence, or gross mismanagement, or if such an appointment is in the interest of creditors, any equity security holders, and other interests of the estate. 11 U.S.C. § 1104(a). Moreover, the U.S. trustee is required to move for appointment of a trustee if there are reasonable grounds to believe that any of the parties in control of the debtor "participated in actual fraud, dishonesty or criminal conduct in the management of the debtor or the debtor's financial reporting." 11 U.S.C. § 1104(e). The trustee is appointed by the U.S. trustee, after consultation with parties in interest and subject to the court's approval. Fed. R. Bankr. P. 2007.1. Alternatively, a trustee in a case may be elected if a party in interest requests the election of a trustee within 30 days after the court orders the appointment of a trustee. In that instance, the U.S. trustee convenes a meeting of creditors for the purpose of electing a person to serve as trustee in the case. 11 U.S.C. § 1104(b). The case trustee is responsible for management of the property of the estate, operation of the debtor's business, and, if appropriate, the filing of a plan of reorganization. Section 1106 of the Bankruptcy Code requires the trustee to file a plan "as soon as practicable" or, alternatively, to file a report explaining why a plan will not be filed or to recommend that the case be converted to another chapter or dismissed. 11 U.S.C. § 1106(a)(5). Upon the request of a party in interest or the U.S. trustee, the court may terminate the trustee's appointment and restore the debtor in possession to management of bankruptcy estate at any time before confirmation.11 U.S.C. § 1105. |
