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Petition
The bankruptcy is an essential tool that prevents the economy from the development of chaotic relations and ignorance of basic laws and norms concerning return of debts. In actuality, the bankruptcy law is widely applied, especially Chapter 7 which is the most common mechanism of bankruptcy in the US. At the same time, to file a petition for bankruptcy is not always simple. In this respect, it is possible to refer to the case of Walnut Street Four and petition filed by Beren. In fact, Beren is a member of partnership and of the owners of Walnut Street Four. However, he has a different vision of the development of the company and he is certain in the failure of the business. This is why he files Chapter 7 bankruptcy. At this point, it is important to lay emphasis on the fact that Chapter 7 bankruptcy implies that the company or individual that files Chapter 7 bankruptcy stops its business activities and goes out of business. In such a way, if Beren decides to file the petition for Chapter 7 bankruptcy, this means that he recognizes that the company is ruined and it cannot carry on its business activities anymore (Balleisen, 2001). In such a context, the petition for the involuntary bankruptcy should be granted as the one of the owners of a company is willing to stop the business and the company cannot pay off its debts.
However, in actuality, the situation is not as simple as that. As the matter of fact, the company does fail to pay off its debts and it cannot afford paying off its debts anymore. On the other hand, Beren is not the only owner of Walnut Street Four. Instead, he has two partners, Elliot and Mannino, who have their own share in business. Moreover, the problem and financial difficulties Walnut Street Four is currently facing emerged in the result of the dispute or disagreement between partners on the future development of the company. Beren is unwilling to reconsider the original plan and estimated expenses of the company, whereas his partners insist on the change of the estimated expenses. The latter could have allowed the company to carry on its business activities because the company could get additional financial resources and to accomplish the original business plan successfully with the higher debt that partners originally expected to have. In such a way, the problem arise because it is unclear whether the company cannot carry on its business activities that opens the way for granting the petition for involuntary bankruptcy under Chapter 7 or the company just needs more financial resources to keep its business developing. In such a case, taking into consideration financial difficulties of the company, it would be more logical to file Chapter 11 bankruptcy, which allows the company to carry on its business activities to pay off its debts. Therefore, the policies conducted by partners define the mechanism or Chapter through which the company can run bankrupt. In actuality, this means that if Elliot and Mannino do not have objections concerning the bankruptcy under Chapter 7 and they are ready to stop their business, than the petition for voluntary bankruptcy can be granted but if Elliot and Mannino keep insisting on the change of the estimated expenses and continuation of business, the petition for voluntary bankruptcy cannot be granted.
Reorganization
The reorganization is an effective mechanism when a company or individual urn bankrupt. As a rule, reorganization occurs in terms of Chapter 11 bankruptcy and it is mainly companies that are involved in such procedure. In this respect, it should be said that Friese also has the right and possibility to file Chapter 11 bankruptcy. However, the plan suggested by Friese cannot be confirmed by the court. In this respect, it is necessary to take into consideration several reasons. First of all, the future of Friese is uncertain in terms of his ability to pay off debts as he planned. Second, creditors voted against the plan suggested by Friese. In actuality, this means that they do not support this plan because it is probably does not meet their interests, wants and needs (Sandage, 2006). At the same time, Friese insists on the implementation of his plan and he does not have any plausible alternatives. In such a situation, the debtor, Friese, and creditors cannot come to agreement and, what is more important for the court, creditors voted against the plan developed by the debtor. This is the crucial reason why the court cannot confirm the debtor’s plan of reorganization. In such a way, it is obvious that the court will not take the decision in favor of Friese and he needs to develop the plan which could meet needs and want of his creditors. At any rate, the court can confirm the plan only on the condition that creditors have voted for it. Otherwise, the court should file Chapter 7 bankruptcy and restore status quo before the bankruptcy.
References:
Balleisen, E. (2001). Navigating Failure: Bankruptcy and Commercial Society in Antebellum America. Chapel Hill: University of North Carolina Press.
Sandage, S.E. (2006). Born Losers: A History of Failure in America. Cambridge, Mass: Harvard University Press.