Why did Philadelphia Energy Solutions File for Bankruptcy?

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Philadelphia Energy Solutions (PES) filed for Chapter 11 bankruptcy protection, its second such filing in less than two years, after a fire  prompted it to close the largest refinery on the U.S. East Coast. Following the June 21 explosions and blaze, PES started shutting down the 335,000 barrel-per-day Philadelphia plant without a planned restart. Some 1,000 workers are being laid off.

 

The company’s lenders agreed to provide up to $100 million in new financing to PES to usher it through the bankruptcy. The agreement allows PES to safely wind down its refining operations and, with the support of its insurers and stakeholders, hopes to position the company for a successful Chapter 11 Bankruptcy reorganization, the rebuilding of its damaged infrastructure, and a restart of its refining operations.

 

The success of the reorganization plan is critical to energy supply and security for the region, the Commonwealth of Pennsylvania and the City of Philadelphia,

 

PES could receive payouts of $1.25 billion in insurance claims connected to the fire and business closure. The potential insurance payouts include $1 billion for property damage and $250 million for loss of business.

 

The insurance payouts were expected to be used as collateral for the new Chapter 11 Bankruptcy financing, PES also asked the Bankruptcy Court to allow it to continue making insurance payments. Its premiums cost about $1.4 million each month on 39 policies, according to filings with the U.S. Bankruptcy Court.

 

PES has multiple owners, including investment bank Credit Suisse and investment firm Bardin Hill, and has both assets and liabilities between $1 billion and $10 billion Bankruptcy Court filings show.

Michael A. Cibik, Esquire

Michael A. Cibik is a partner at the Philadelphia bankruptcy law firm of Cibik & Cataldo, P.C. He is one of the few bankruptcy attorneys in the Philadelphia area certified by the American Bankruptcy Board.

If you or someone you know is having financial problems, stop worrying and call Michael at (215) 735-1060 for a free consultation.

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What Is the Great Computer Myth on Credit Reporting?

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We need to know all the debts you owe or might possibly owe in order to put a Bankruptcy case together. One mistake debtors often make as we get into deeper debt is to stop looking at the bills and notices. It’s stressful enough to have debt collectors calling, so we stop reading or keeping the bills and notices just to stay sane. If you can’t pay it, even opening the envelope hurts a bit.

 

But if you don’t read and keep the notices and bills, it is much harder for someone else to help you. Folks come in to see me and have no real idea who they owe now, how much, or what for. Often folks think it’s OK because there’s a record somewhere of everything they owe, like there is some Great Computer that has all this information in it, and the NSA is not letting bankruptcy lawyers get at it!

 

There are services that allow us to access your credit reports, with your consent.  And you can have free copies of your credit report each year too.  But your credit report is not going to help us very much in building your case for you.

 

However, some lenders do not report to credit bureaus. Some debt may be too old to appear on your report – but still be a debt you owe.  Some is just not the type of thing that pops up on credit reports – like a debt for damage to a neighbor’s car or money you owe a friend. Mistakes on credit reports happen a lot more than they want to admit.  A credit report will only tell us what some creditors, possibly yours, claim you owe them –not every creditor or potential creditor you could owe.

 

If you don’t list some of your debt in your case even by accident, it can be harmful to your financial health. In the simplest cases, it just means you have to spend more in attorney fees and court filing fees to fix the paperwork filed in your case.  But in extreme cases – particularly cases where some money is paid into the bankruptcy trustee’s hands from your assets or your payment plan – then the unlisted debts may not be wiped out at the end of a successful case

 

So even if it is physically painful to keep the bills and threatening notices from creditors, do it anyway. Don’t put your faith in the Great Mythic Computer to save you

Michael A. Cibik, Esquire

Michael A. Cibik is a partner at the Philadelphia law firm of Cibik & Cataldo, P.C. He is one of the few bankruptcy attorneys in the Philadelphia area certified by the American Bankruptcy Board.

If you or someone you know is having financial problems, stop worrying and call Michael at (215) 735-1060 for a free consultation.

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Why File Chapter 7 Business Bankruptcy?

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Corporations and LLC’s don’t get a discharge in a Chapter 7 bankruptcy, so what’s the point of filing? Ensuring that business assets go to pay payroll, benefits, and taxes is a compelling reason.

 

Chapter 7 is a liquidation proceeding; the trustee appointed by the court will gather up and sell the corporation’s assets and pay creditors in the order of their priority under the Bankruptcy Code.

 

It is the notion of priority, then, that may make it advantageous for a corporation going out of business to file bankruptcy. The Code’s priority scheme provides that claims with a higher priority are paid in full before claims with a lower priority get anything.

 

The business owner probably has two personal concerns about what happens to the business assets: they wants to receive payment in their role as employee, and to see that taxes for which the individual might be liable personally get paid from corporate assets to the extent possible.

 

The owner’s concerns dovetail nicely with the priority scheme: unpaid wages incurred in the 180 days before filing or cessation of the business, whichever came first, have a priority for payment. Claims are capped at $10,000 per employee.

 

Taxes owed to governmental agencies have a high priority for payment in bankruptcy. While the shareholder probably isn’t liable for the corporation’s income tax or property tax, the individual may well be liable for any unpaid trust fund taxes (employment taxes) or for unpaid sales tax. The shareholder has a real interest in payment of these taxes before payment of run of the mill business debts.

 

So, one very good reason for a business corporation to file a Chapter 7 bankruptcy is to see that priority claims are paid, instead of the claim of a creditor without a priority who files a collection action.

Michael A. Cibik, Esquire

Michael A. Cibik is a partner at the Philadelphia law firm of Cibik & Cataldo, P.C. He is one of the few bankruptcy attorneys in the Philadelphia area certified by the American Bankruptcy Board.

If you or someone you know is having financial problems, stop worrying and call Michael at (215) 735-1060 for a free consultation.

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