Facing Bankruptcy

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Facing Bankruptcy

Submitted by:
Ritchel R. Reyes

Submitted to:
Dr. Antonio Arturo Manahan

Colegio de San Juan De Letran
Masteral in Business Administration
January 15, 2011

Chapter One
The Problem and its Background
Background of the Study
Bankruptcy might have a different definition based on the people who are will defining it, when investors heard this world they have different reaction some are afraid and anxious while for others it can mean opportunity and a business merging. Some investors are looking for a business who are in the bridge of bankruptcy so they will have the chance to take over the business but on the part of the owner who are in the verge of bankruptcy it can mean the end of the world, because it might be the only thing he has and needs to give it up. Based on Wikipedia Bankruptcy is a legally declared inability or impairment of ability of an individual or organization to pay its creditors. Creditors may file a bankruptcy petition against a business or corporate debtor ("involuntary bankruptcy") in an effort to recoup a portion of what they are owed or initiate a restructuring. In the majority of cases, however, bankruptcy is initiated by the debtor (a "voluntary bankruptcy" that is filed by the insolvent individual or organization). An involuntary bankruptcy petition may not be filed against an individual consumer debtor who is not engaged in business.

Many businesses now a day experience bankruptcy, Bankruptcy was originally planned as a remedy for creditors not for the debtors. During the time of King Henry VIII, a law was made to allow creditor to seize all the remaining assets of a trader who could not pay their debt. And the debtor will not lose his freedom he will be charge and subject for imprisonment. In early 19th century in England, debtors were often released from prison with their debts discharged. However, for many years, bankruptcy continued to be a remedy favoring creditors, involuntary in nature and largely penal in character. It was generally used only against traders.

Bankruptcy offers an individual or business a chance to start fresh by forgiving debts that simply can't be paid while offering creditors a chance to obtain some measure of repayment based on what assets are available. In theory, the ability to file for bankruptcy can benefit an overall economy by giving persons and businesses another chance and providing creditors with a measure of debt repayment.

Still remember the Lehman Brothers Holding Inc. a global financial service firm that did business banking, equity and fixed income sales, research and trading, investment management, private equity and private banking. Its bankruptcy filing is the largest US history, involving debt amounting to $613 billion and assets worth $639 billion. So far, the Philippines during that time have not felt the effect of the financial mayhem in the US in any major way. The Philippine banking system has minimal exposure to structured financial products: news accounts of Philippine banks’ exposure to the Lehman Brothers’ collapse put it at approximately 0.11 percent of total banking assets, or PhP5.5 billion. Individual banks with market losses from the derivatives securities have already allocated increased loss provisions in their capital. But the United States is a large economy with major effects on the global economy, so the Philippines will eventually also feel the pinch. There are several ways through which this is going to take place. Some of the banks here in our country who had invested on the Lehman Brothers are Banco de Oro and Metropolitan Bank of Trust and Company.

If I may sight some other corporation in the United States who filed bankruptcy in 2008 were Washington Mutual Inc., a savings bank holding company and former owner of Washington Mutual Bank, then largest savings and loan association in the US. The IndyMacBancorp, Inc., Holding company of IndyMac Bank, the largest savings and...
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