very informative. Thanks.
Ultravires, you may be missing my point. I believe financing arranged after bankruptcy, during DIP, (and provided it’s approved as such by the judge) has precedence over all those equal (pre bankruptcy) creditors. Meaning it is likely to be fully repaid. Meaning it is financing they can actually get. So for a company that uses a lot of short-term financing to operate, it may be the only way to access cash to continue operating.
Oh no. I agree. But it is financing that must be approved by the bankruptcy court after a showing that the business can be otherwise profitable. But indeed you are correct that if the financing is secured, that creditor has a priority status in law.
You can file for bankruptcy protection any time. Whether or not the judge will actually grant it is something else again.
IANAL, but it would seem unethical NOT to file for bankruptcy when you anticipate that FUTURE losses will make you insolvent.
Otherwise PG&E and its employees would be making phone calls like “Hi, sweetheart! I suggest you file your invoices and claims real soon. [del]Since I may be out of a job before long, I suggest we share a hotel room on our next Vegas trip!! OK? I’ll bring the handcuffs.[/del]”
I’m told that bankruptcy lawyers encourage their clients to run up their credit cards bills prior to filing, in a splurge of orgiastic spending! Might as well go out in style and get your money;s worth.
Any bankruptcy lawyer who gives such advice should be reported to his or her state ethics commission. That is advising a defrauding of creditors and no lawyer should be complicit in that.
Although I wouldn’t lose a second of sleep over credit card companies losing money, you cannot just roll up debt without the intention of paying it back. Bankruptcy is for people who find themselves in an unfortunate situation, not one that they have purposefully placed themselves in or intentionally exacerbated the one that they are in.