Quote:
Originally Posted by Julie Jordan
Kyle, you could have assets that are worth more than your liabilities but still can file bankruptcy, especially if the assets are hard to sell, would take a lot of time, etc. For example, you could have a building but little cash to operate with, have creditors and employees breathing down your back. In conditions like we are experiencing now, cash is necessary to get businesses through this pandemic downturn and closures. Bankruptcy basically provides debtors with significant power to rearrange their business affairs while giving creditors a clear plan as to how they will get paid. If there are lawsuit issues oftentimes the defendant will file bankruptcy, get that debt in the entire scheme of the finances.
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Thank you for responding and I should have narrowed it down to be more specific for the NHRA. I do understand about the lawsuit issues and that is why I somewhat referenced it with my "obligations" comment. I wrote that thinking about how Texaco filed bankruptcy many years ago to protect them from the lawsuit that Pennzoil won when Texaco gave Getty a get out of jail free card to sell to them instead of Pennzoil. I think Pennzoil was awarded something like $10 billion which made Joe Jamail famous (and rich). I digress.
Specifically on the NHRA it appears that compensation for upper management and the board of directors are their greatest ongoing liability. Why would the board want to put their organization into potential receivership or at the mercy of a bankruptcy judge that would determine their ongoing compensation as they are working through a reorganization? Their compensation would appear to be the first thing at risk of significant reductions by a judge.