Chapter 11 under fire

Chapter 11 under fire

Chapter 11, the popular US insolvency procedure, has come under attack for being unfair and allowing some companies to escape their debts, so they can compete more aggressively in their marketplace.

Link: Debt-ridden United Airlines files for Chapter 11

The criticisms come as Chapter 11 applications – which provide protection from creditors and allows troubled businesses to raise untouchable bank loans – reach record numbers, but also prompt deep-seated worries.

Critics say companies are using chapter 11 to renege on contracts as well as eliminate borrowings.

Among the dissenters are Ivan Seidenberg, CEO of US telco Verizon, who has claimed that Chapter 11 has been used by some big names to ‘cleanse their sins, but then drive prices down’.

British Airways CEO Rod Eddington has also levelled accusations at the insolvency procedure by saying that an airline that recently entered Chapter 11 could now compete more aggressively on price.

Related Articles

Carillion CFO blew whistle over 'sloppy accounting' months before collapse

Business Recovery Carillion CFO blew whistle over 'sloppy accounting' months before collapse

4m Alia Shoaib, Reporter
Toys R Us UK and Maplin enter into administration after failing to secure buyers

Business Recovery Toys R Us UK and Maplin enter into administration after failing to secure buyers

4m Alia Shoaib, Reporter
How to avoid a Carillion collapse

Business Recovery How to avoid a Carillion collapse

5m Russell-Cooke
Carillion collapse: The week so far and industry reaction

Business Recovery Carillion collapse: The week so far and industry reaction

5m Emma Smith, Managing Editor
Kingston Smith & Partners appointed trustees in bankruptcy of ex-Newcastle United footballer

Business Recovery Kingston Smith & Partners appointed trustees in bankruptcy of ex-Newcastle United footballer

5m Emma Smith, Managing Editor
Carillion: PwC appointed as special managers – what happens now?

Business Recovery Carillion: PwC appointed as special managers – what happens now?

5m Emma Smith, Managing Editor
Investment firm acquires Avon Steel Company Limited

Business Recovery Investment firm acquires Avon Steel Company Limited

6m Emma Smith, Managing Editor
Manchester law firm enters into administration

Business Recovery Manchester law firm enters into administration

6m Emma Smith, Managing Editor