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Entries in Bankruptcy (50)

Saturday
Jul132013

Twinkies Return to Store Shelves Early at Wal-Mart

Photo by Justin Sullivan/Getty Images(NEW YORK) -- Hostess Brands LLC has begun to return Twinkies to some store shelves three days ahead of the announced national roll-out.

Twinkies are already available at many Wal-Mart stores, despite previous announcements targeting the re-release of the Twinkie for Monday. The confection was available in 1,600 of Wal-Mart's 4,000 stores by Friday night and will be available in approximately 3,000 stores by Sunday, says the New York Daily News. The new Twinkie's shelf life is said to be 45 days. That's almost three weeks longer than the 26 days the former Twinkie was supposed to stay fresh.

Hostess Brands, based in Kansas City, Mo. had stopped operations at the last of its 11 factories in November after failing to reach an agreement with its second biggest union, the Bakery, Confectionery, Tobacco Workers & Grain Millers International Union. The company filed for bankruptcy on Nov. 16. The new owners of Hostess have cut the number of plants to four and the products will be sold through convenience and grocery stores only. Some 600 Hostess thrift stores have been closed permanently.

Other differences for the new product include how the goods will be distributed. Company spokeswoman Hannah Arnold said "90 percent of the product will still be delivered fresh," but some will be delivered frozen.

"A select number of customers -- representing only about 10 percent of Hostess' distribution -- have explicitly requested to receive frozen product," Arnold said. "This allows the retailer to date the product for freshness, provides flexibility in filling their shelves and has no impact on the quality or taste of the products. The decision is up to the customer. The only stores that will receive frozen product are those that request it."

Copyright 2013 ABC News Radio

Friday
Jan042013

Patrick Dempsey Tweets Victory in Attempt to Buy Tully's Coffee

Jason LaVeris/FilmMagicUPDATE: Tully's confirmed on Friday that Patrick Dempsey won the bid to buy the bankrupt coffee chain.

In a statement, the company said "it is a step closer to exiting from bankruptcy with the sale of its assets to Global Baristas, the investment group that includes Grey’s Anatomy star Patrick Dempsey.  Global Baristas was selected as the winning bidder late last night, with a bid of almost $10 million."

(NEW YORK) -- With a tweet late Thursday night, it seems Patrick Dempsey got his wish to buy a flagging coffee chain in order to save hundreds of jobs.

Last week, the Grey's Anatomy star recently went public in a quest to buy bankrupt Seattle-based Tully's Coffee, which employs about 500 people.

Dempsey led a group of investors that pitched bids, with coffee giant Starbucks among the actor's main competition, and the actor's post seemed to show his team came out on top.

"We met the green monster, looked her in the eye, and...SHE BLINKED! We got it! Thank you Seattle!" he wrote.

Starbucks' corporate logo, a female face known internally as "the Siren," is green.

The actor was in Seattle on Thursday as part of an auction process for Tully's.  He said he felt a connection to the Emerald City, in part because his ABC series is set at the fictional Seattle Grace Hospital.

Dempsey, who plays Dr. Derek "McDreamy" Shepherd on Grey's Anatomy, told ABC News affiliate KOMO-TV, "I love it here.  Even the weather is great to me....Great people....Certainly with the success of the show there's a fondness to this community."

Dempsey explained he and his Global Baristas group had Tully's employees in mind.

"I think some of the players involved in this deal want to take those jobs away, and you're looking at an economy that's rough to get jobs.  I went by one of the stores yesterday and the employees are deeply concerned.  That's one thing we care deeply about," the actor said.

Copyright 2013 ABC News Radio

Friday
Dec212012

Graduates, Parents Riddled with Student Debt Turn to Bankruptcy

The Bryski Family(PALMDALE, Calif.) -- A mourning father in California finally resolved his dead son's student loan debts more than four years with an exhausting journey through the courts and other maneuvers.

Francisco Reynoso, 57, of Palmdale, Calif., is a self-employed gardener. His son, Freddy, died in a car accident on Sept. 5, 2008 after graduating from the Berklee College of Music in May 2008.

The $200,000 in loans that he co-signed became due two months after his son's death, which the Reynosos tried to pay with their $20,000 a year income. While their son's federal loan through the U.S. Department of Education was voluntarily discharged due to Freddy's death, the only recourse for the Reynosos to discharge his private loans was through legal means.

With only a second grade education from Mexico, Garcia only speaks Spanish and makes $1,573.33 a month. His wife was laid off from her job as a machine operator in 2003, went to cosmetology school in 2009 but has struggled to find employment.

Erik Clark, an attorney for Reynoso, said private student loan debt is "blowing out of control" and lawyers are unlikely to want to take on legal cases involving the issue.

"We hardly ever take them," Clark said about student loan legal cases.

There are various laws and guidance for lenders, but a family in New Jersey is searching for a member of Congress to reintroduce a bill that would encourage more transparency when a family member co-signs a student loan.

More than six years after Christopher Bryski died from a traumatic brain injury, and two years after the late Rep. John Adler, D-N.J., introduced the Christopher Bryski Student Loan Protection Act in 2010, the Bryski family is hopeful Christopher's Law, as they call it, will be re-introduced in the next session starting in January.

Last April, the private lender forgave the remaining $30,000 or so of Christopher Bryski's loans that his father had co-signed.

In July 2011, the Federal Trade Commission released guidelines around debt collection for those who have died. In July 2011, the Federal Trade Commission released guidelines around debt collection for those who have died, saying contacting a relative other than the deceased person's spouse, parent or guardian – if the person is a minor – when they have no legal obligation to pay the debt, may be violating the FDCPA. The FTC also explained how a debt collector can avoid engaging in deceptive practices in communicating with a third party about a decedent's debts.

The Fair Debt Collection Practices Act (FDCPA) of 1996 amended the Consumer Credit Protection Act to prohibit abusive practices by debt collectors.

In order for a lender or family of a deceased borrower to discharge private student loan debt, they often file for bankruptcy in hopes that a judge will deem that the student loan imposes an undue hardship on the debtor.

"It's unlikely a client who has undue hardship will have the funds to pay attorneys for the work that goes into this. Nobody is going to get rich trying student loan cases," Clark said.

Reynoso filed for bankruptcy on April 20, 2012 in his quest to prove "undue hardship."

"While that standard doesn't sound high, it is actually very high, which is why these cases are so difficult to proceed with," Clark said.

Reynoso and Clark had to deal with a complicated paper trail of his son's loans, as reported by ProPublica. The first loan was from Bank of America. It was later sold to First Marblehead's National Collegiate Trust, which didn't respond to Reynoso's lawsuit. Fortunately for him the judge then awarded him a default judgment.

"It was not great lawyering on our side. They just didn't respond," Clark said.

The larger part of the loans passed through the Swiss bank UBS and then was acquired by the Swiss central bank during the financial crisis. StabFund ultimately settled with Reynoso, said his attorney, though he can't discuss the terms of the agreement.

StabFund did not respond to a request for comment.

Clark said Reynoso is off the hook after a long effort, but unless there are changes in public policy or greater awareness about student loans, graduates--or their heirs--loaded with unaffordable debt have little recourse but to file for bankruptcy to "get creditors off your back."

"The vast majority of people we're seeing have enormous student loan debt and can't get employed," he said. "They are 40 or 50 years old who go back to school for master's degrees that earn nothing. They will never pay this off."

Copyright 2012 ABC News Radio

Friday
Nov162012

Twinkies Maker Will Close After Strike

Justin Sullivan/Getty Images(IRVING, Texas) -- Hostess Brands Inc., the maker of the iconic snack Twinkies, announced Friday morning that it will liquidate the entire company because not enough striking employees returned to work by a Thursday evening deadline set by the company.

"We deeply regret the necessity of today's decision, but we do not have the financial resources to weather an extended nationwide strike," Hostess CEO Gregory Rayburn said in a statement.  "Hostess Brands will move promptly to lay off most of its 18,500-member workforce and focus on selling its assets to the highest bidders."

Hostess said it will seek bankruptcy court permission to close its business and sell its assets, "including its iconic brands and facilities."

The company said "bakery operations have been suspended at all plants," but already-baked products will continue to be delivered and sold.

On Wednesday, Rayburn said in a statement that "if sufficient employees do not return to work by 5 p.m., EST, on Thursday to restore normal operations, we will be forced to immediately move to liquidate the entire company."  The deadline came and went without enough striking workers returning.

The strikes began on Nov. 9, when Hostess imposed a contract that would cut workers' wages by eight percent.  The Bakery, Confectionery, Tobacco Workers and Grain Millers International Union (BCTGM) said the contract would also cut benefits by 27 to 32 percent.

Hostess, which is privately owned by two hedge funds, has struggled in recent years with two bankruptcy filings.  The company said it "has done everything in its power to pursue a reorganization of its business as a going concern, including spending the better part of 18 months negotiating with its key constituents to obtain a consensual agreement."

"It is now up to Hostess' BCTGM-represented employees and Frank Hurt, their international president, to decide if they want to call off the strike and save this company, or cause massive financial harm to thousands of employees and their families," Rayburn said Wednesday in announcing the deadline.

"Hostess Brands is making a mockery of the labor relations system that has been in place for nearly 100 years," BCTGM President Frank Hurt said in a statement earlier this week.  "Our members are not just striking for themselves, but for all unionized workers across North America who are covered by collective bargaining agreements."

Friday's announced decision means the closure of 33 bakeries, 565 distribution centers, approximately 5,500 delivery routes and 570 bakery outlet stores throughout the United States, the company said.

Copyright 2012 ABC News Radio

Monday
Oct152012

'Popcorn Lung' Couple Gets $20M Award, Files for Bankruptcy

Ciaran Griffin/Thinkstock(NEW YORK) -- Eric and Cassandra Peoples won a $20 million judgment. Now, they're broke.

The Joplin, Missouri, couple made national headlines when, in 2004, a jury awarded Eric $18 million and Cassandra $2 million, for what were determined at the time to be heath injuries that Eric suffered from workplace exposure to the chemical diacetyl, an ingredient used to give popcorn its buttery flavor and aroma.

In the years since Peoples filed his suit, other workers elsewhere around the U.S. have sued for the same injury and won.

As reported by ABC News, Dutch researchers were first to establish a relationship between the chemical and a condition known as "popcorn lung," which first came to light among U.S. popcorn workers in 2001 at a plant making microwaveable popcorn.

According to U.S. researcher David Michaels, a former assistant secretary of energy, heated diacetyl produces a gas not only toxic but potentially lethal. "It just devastates their lungs," he told ABC News. Manufacturers have paid out in excess of $100 million in damages to workers suffering popcorn lung.

Symptoms include dry cough, shortness of breath and wheezing, according to an OSHA "hazard communication" on the chemical, which also goes under the name butanedione. The formal name for "popcorn lung" is Bronchiolitis obliterans.

When Eric Peoples brought his lawsuit against his then-employers, a flavor-and-fragrance maker, doctors testified that he eventually would need a double-lung transplant, according to the Joplin Globe. The newspaper says it was never clear how much of the verdict money the Peoples ever received, since an unstated portion, according to attorneys, was meant to be given to other workers injured at the same plant.

A phone call by ABC News to the Peoples was not returned. Their attorney chose not to comment.

The Peoples' bankruptcy petition, filed in the Western District of Missouri, Joplin, on Sept. 10, does not describe the luxuries one might associate with a $20 million windfall. It lists personal property assets of not quite $33,000. The couple also own a home valued at $700,000 on 10.5 acres. The filing claims the couple's total liabilities are in excess of $611,000.

Among the personal property listed are two Honda automobiles, a Chrysler PT Cruiser and a Kawasaki Mule; a bedroom set, dryer, end tables, china, lamps, a VCR, a microwave oven and $50 worth of camera equipment.

Copyright 2012 ABC News Radio

Friday
Oct122012

"Rich Dad, Poor Dad" Author Files for Bankruptcy for His Company

Eugene Gologursky/WireImage(NEW YORK) -- Robert Kiyosaki, author of the book, Rich Dad, Poor Dad filed for corporate bankruptcy through one of his companies, Rich Global LLC.

Kiyosaki first published Rich Dad, Poor Dad in the 1990s, eventually becoming a New York Times best-seller despite criticism of his personal finance tips, such as his emphasis on real estate investing.

He went on to write a number of follow-up books such as Retire Young, Retire Rich, and Midas Touch, co-authored with real estate mogul and television personality Donald Trump.

Rich Global LLC filed for Chapter 7 bankruptcy protection on Aug. 20 in a Wyoming bankruptcy court, the New York Post reported this week.

Kiyosaki and his bankruptcy attorney did not immediately respond to requests for comment.

The company had been weighed down by a lawsuit filed by Learning Annex, one of Kiyosaki's earliest backers who had helped arrange his public speaking events earlier on, Forbes reported.

Bill Zanker, the founder and president of Learning Annex, sued Kiyosaki after he allegedly failed to pay a percentage of profits from his speaking engagements. A district judge in New York awarded Learning Annex $23.7 million.

"I took Kiyosaki's brand and made it bigger," Zanker told the New York Post. "The deal was I would get a percentage, and he reneged. We had a signed letter of intent. The Learning Annex is the greatest promoter. We put his Rich Dad brand on a stage. We truly prepared him for great fame and riches. But when it was time for him to pay up, he said 'no.' "

However, Kiyosaki isn't taking after his poor dad's title just yet. Though Rich Global LLC has filed for bankruptcy, he reportedly conducts business through a number of corporations, including Rich Dad Co.

Mike Sullivan, CEO of Kiyosaki's Rich Dad Co., told the Post, "The dealings we had with Learning Annex were with a company that hasn't been in business for a number of years...I am not surprised Learning Annex is upset and angry, the money doesn't exist in that company, and we can't bring money out of the group.

"Robert and [wife] Kim are not paying out of personal assets. We have a few million dollars in this company, but not 16 or 20. I can't do anything about a $20 million judgment...We got hit for what we think is a completely outlandish figure," he continued.

Rich Global LLC's liabilities are nearly $26 million with assets of $1.8 million, according to its bankruptcy filing. Its biggest creditor is the Learning Annex due to its $23.7 million legal claim.

The meeting of creditors was held on Sept. 26 and the deadline for creditors to file claims is Jan. 2., according to the Executive Office for U.S. Trustees.

Copyright 2012 ABC News Radio

Saturday
Aug252012

Kodak Goes Bankrupt and Sells Film Divisions

Daniel Acker/Bloomberg News(LOS ANGELES) -- Eastman Kodak is bankrupt, and the company is selling their film divisions, the Los Angeles Times reports.

The Rochester, N.Y.-based company wants to unload their personalized imaging and document imaging businesses that includes the “traditional photographic paper and still camera film products.”

The company hopes a deal will be sealed by the first half of 2013.

In January, Kodak filed for bankruptcy and is currently auctioning off more than 1,000 of its patents.

Copyright 2012 ABC News Radio

Thursday
Aug022012

San Bernardino, Calif., Files for Bankruptcy

Jupiterimages/Thinkstock(SAN BERNARDINO, Calif.) -- San Bernardino today became the third California city since June to file for bankruptcy, citing a $46 million budget shortfall and $1 billion in debt.

Under Chapter 9 bankruptcy, Mayor Patrick J. Morris told Bloomberg News that court cases and other actions against the city by creditors will be halted.

“All of our vital service bills will continue to be paid,” Morris said. “We are going to keep our city services running.”

San Bernardino’s problems have been years in the making: An analysis prepared by the city’s finance department blames “accounting errors, deficit spending, lack of revenue growth and increases in pension and debt costs.”  The recession also hit the city hard. San Diego County has the third-highest rate of foreclosures in the nation.

The “accounting errors” may not have been innocent. According to San Bernardino’s city attorney and as reported in the LA Times, budget officials for over a decade falsified financial reports, in an attempt to mask the city’s problems. “The mayor and the council were not given accurate documents,” the Times quotes the attorney as saying.

The city’s deficit stands at $46 million, despite the fact that San Bernardino has cut its workforce 20 percent in the past four years.

The reasons for the fiscal troubles include high pension costs, falling revenue from property taxes and a municipal salary increase scheme that ties worker pay to salaries in other California cities that are better off, city officials have said.

Stockton and the small Sierra hamlet of Mammoth Lakes have also filed for bankruptcy court protection.

Copyright 2012 ABC News Radio

Wednesday
Jul112012

City Budget Problems: San Bernardino, California Files for Bankruptcy

Hemera/Thinkstock(NEW YORK) -- Cities across the country are increasingly facing severe budget problems, and that's leading many of them to cut corners or consider bankruptcy.

On Tuesday, San Bernardino became the third city in California to file for bankruptcy protection in less than a month.  Stockton filed last month and the ski resort town of Mammoth Lakes voted to file last week.

The alternative to bankruptcy can be drastic spending cuts. That's happening in some other cities, like Scranton, Pa.  Municipal unions there are filing a lawsuit after the mayor decided to cut the pay of city employees to minimum wage -- $7.25 an hour.

Copyright 2012 ABC News Radio

Wednesday
Jun272012

Stockton, Calif. Faces Bankruptcy After Mediation with Creditors Fails

David Paul Morris/Bloomberg via Getty Images(STOCKTON, Calif.) -- Stockton, Calif., officials announced Tuesday night that mediation with creditors failed, meaning the city of about 300,000 people is set to become the largest American city to ever declare bankruptcy.

"We think Chapter 9 protection is the only choice left.  If we get any agreements, those will be honored in Chapter 9," City Manager Bob Deis told the City Council.

City lawyers could file for Chapter 9 protection in court as soon as Wednesday.

Vallejo, Calif., with half the population of Stockton, is the largest U.S. city to date to file for bankruptcy.

The benefit of filing for bankruptcy, Stockton officials say, would be to buy time for Stockton to renegotiate its debts on terms more advantageous to the city.  It would remove, at least temporarily, the need for Stockton to make budget cuts even more drastic than those already made.

Stockton, before the bursting of its real estate bubble in 2007, had been riding high.  Between 2000 and 2006, housing prices rose from a median of slightly more than $110,000 to almost $400,000, according to "How Stockton Went Bust," an analysis prepared by California Common Sense (CCS), a nonpartisan, nonprofit group advocating financial transparency.

The city spent generously on projects to rehabilitate and beautify its downtown.  It developed a downtown marina.  It augmented the salary and benefits of city workers.

The generous employment agreements to which the city committed in the mid-2000s, says the CCS report, now comprise the bulk of the city's budget.

"The city now faces more than $800 million in unfunded liabilities for pensions and other retirement benefits," the report notes.

The City Council has addressed about $90 million in deficits in the past three years, in part by eliminating 25 percent of the city's police force, 30 percent of its firefighters, and 43 percent of all other employees, according to a news release issued by the city.

It has sought to boost revenue through fines and parking citations, eliminating payments of bonds, modifications to terms of its labor agreements, and salary and benefit reductions.

Despite such efforts, the city faces a $26 million deficit in the fiscal year that begins on July 1.  California's state constitution requires cities to adopt a balanced budget by July 1 of each year.

Copyright 2012 ABC News Radio







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