According to an article in Reuters, an independent oil and natural gas company Baseline Oil & Gas Corp filed for Chapter 11 bankruptcy protection in a Texas bankruptcy court due to their inability to pay creditors, declining commodity prices, disappointing development drilling results and the U.S. economic decline. The company has $13.6 million in debt and only $3 million in assets. The debtor has entered Chapter 11 bankruptcy with a "prepackaged" bankruptcy plan, under which existing shareholders will lose all of their money in the company while its creditors receive new secured notes, preferred stock and common stock.
This is another example of how Chapter 11 bankruptcy offers debtor businesses powerful leverage to free themselves from burdensome debt obligations while satisfying creditors. In this case, the debtor has freed itself from any future obligation to its shareholders. When reading these Chapter 11 bankruptcy cases, it always makes me wonder why any individual would be ashamed of filing for bankruptcy. Corporations have no shame about filing for bankruptcy when it will save their company from failure. Why not use bankruptcy to save yourself and your family from financial failure? Bankruptcy allows you to stop creditor actions such as lawsuits, foreclosure, judgments, and wage garnishments , while simultaneously wiping out unsecured debt and securing a fresh financial start. Corporations always give themselves another chance, you should too.