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Thursday, January 22, 2009

Should American Auto Manufacturers File Bankruptcy?

This is a critical time for American auto manufacturers. Profits have been falling for quite awhile, and both GM and Chrysler may be headed toward bankruptcy without financial relief from the federal government. GM is closing approximately 20 plants across North America in anticipation of producing 250,000 fewer cars in the first quarter of 2009 than they did in the first quarter of 2008 (a reduction of about 30%). But is bankruptcy the best option for the auto manufacturers?

There are varying opinions on this matter. A recent survey conducted in early December polled 1,063 adults across the country. The findings indicated that only 26% of new car buyers would be willing to purchase a car produced by a company in bankruptcy.

The primary logic behind this hesitation on the part of consumers lies in the fear that if the bankrupt auto company eventually folds, people stuck with new cars from this manufacturer would be unable to receive the warranty service they deserve. This was certainly the situation with Daewoo, the last auto company that went bankrupt.

However, there are several prominent economists who argue that bankruptcy would in fact be the best option for several auto manufacturers. As part of the bankruptcy proceedings, these companies would undergo a reorganization that may leave them stronger in the long-run. Furthermore, the bankruptcy proceedings would most likely dissolve union contracts, leading to slightly lower wages for auto workers. Bankruptcy would also dissolve contracts regarding health payments and pension obligations. These factors have played a major role in the tenuous economic situation experienced by the big 3 auto manufacturers. By filing bankruptcy, these companies would also have the ability to restructure their debt, providing them with much lower interest rates. For these reasons, bankruptcy may give the big 3 their best chance at survival in these tough economic times.

Friday, January 02, 2009

Should I File Bankruptcy?

Filing bankruptcy is a serious decision that should not be made lightly. It can be a gut-wrenching experience that will most certainly affect you for many years. It will take a long time to rebuild your credit after filing bankruptcy, and this will impact many areas of your life, including buying a home or a car and obtaining affordable insurance.

Before deciding that bankruptcy is the right option for you, it is important to explore all of your other options. While the bankruptcy laws are in place for a reason and can help you discharge insurmountable debts in the right situation, it is best to consider it a last resort. Ultimately, you must choose the best path to financial recovery available to you.

If you are a homeowner, you may be able to take out a low-interest home equity loan that will enable you to consolidate all of your other debts. Frequently, this interest rate will be lower than that of your other debts, and you may be able to pay off your debt slowly in this manner. This is only one option available to you. You should consult with a financial advisor to explore the many other options available to you before deciding to file bankruptcy.

If you decide that bankruptcy is the best decision for you, then you must decide whether to file Chapter 7 Bankruptcy or Chapter 13 Bankruptcy. Chapter 7 is reserved for those people who truly need all of their debts completely discharged. Bankruptcy laws changed in 2005, making the requirements for filing Chapter 7 much stricter. For those who don't qualify for Chapter 7, there is the option of Chapter 13 Bankruptcy, where you must repay part of your debts according to a fixed payment plan.

The laws and regulations governing bankruptcy are very complex. It is important to hire an attorney specializing in bankruptcy law if you do choose this route. Please contact The Bankruptcy Directory today for a listing of lawyers in your area.

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Disclaimer: The information throughout The Bankruptcy Directory is not intended to be or to replace legal advice. The information throughout The Bankruptcy Directory is intended to provide general information regarding bankruptcy law. If you are interested in filing for bankruptcy, contact a bankruptcy lawyer in your area.