The General Motors bankruptcy filing is probably very scary for its current employees, creditors and bondholders; but for General Motors bankruptcy has empowered the beleaguered automaker to get fresh financial start. With bankruptcy, GM is instantly protected from its creditors and has new powers to sever old agreements and discharge debts that would have otherwise sunk the automaker.
According to an article in the Star-Telegram, the bankrupt GM's monthly debt payments will shrink from $67 billion to $9 billion. That's a huge decrease in debt. How can they do that? Well, bankruptcy will allow them to break old agreements and forge new ones that will reduce their debt obligations, helping the future GM to become leaner and more profitable. This is similar to what often happens in Chapter 13 bankruptcy when individuals renegotiate the payment of debt.
When an individual files Chapter 13 bankruptcy (Chapter 11 for companies) he/she becomes empowered to renegotiate the repayment of secured and unsecured debt under reasonable terms and within a reasonable timeframe. Creditors are not allowed to attempt to collect from the debtor outside of the bankruptcy proceedings and can be sanctioned for illegally doing so.
Without bankruptcy, many of these debtors (including debtors such as General Motors) would become completely destroyed by creditors garnishing wages , seizing bank accounts and in the long run creating more financial problems for the debtor. With bankruptcy, the debtor can stop creditor collections and get a fresh start. This is the power of bankruptcy for the corporation and the individual. To find out how bankruptcy can help you get a handle on your finances, contact a Dallas-Fort Worth bankruptcy attorney today.