US bankruptcies in the first quarter were the highest since 2005. You might ask what happened in 2005 to cause a high bankruptcy rate? In that year there were a rush of bankruptcies ahead of a new bankruptcy law that was designed to curb abuses. The law took effect in October 2005.

Now to the present. Let's look at the numbers:

• There were 330,477 filings in the first quarter, up 10% from the previous quarter and up 35% from a year earlier.
• The Administrative Office of the US Courts reported that consumer filings were up 33%, while business filings were up a whopping 64%

Continue reading US bankruptcy filings are still climbing at the highest rate since 2005

US bankruptcy filings are still climbing at the highest rate since 2005 originally appeared on BloggingStocks on Tue, 09 Jun 2009 16:50:00 EST. Please see our terms for use of feeds.

Perhaps it was inevitable, but the car companies fought it. Congress, and perhaps General Motors (NYSE:GM) and Chrysler, are discussing pre-packaged bankruptcies as a way to cut debt and labor costs while the companies get back on their feet.

It is probably a bad idea.

According to Bloomberg, "Staff for three members of Congress have asked restructuring experts if a pre- arranged bankruptcy -- negotiated with workers, creditors and lenders -- could be used to reorganize the industry without liquidation."

Why won't it work? Several reasons. The first is that a bankruptcy plan takes time, the one thing Detroit does not have. A pre-packaged program means getting deals from labor, lenders and suppliers. That can't be done in a day, a week, or a month.

Next, some car parts suppliers are already near bankruptcy themselves. Asking them to take less money from GM and Chrysler could push them into Chapter 11.

Last, and perhaps most important, the UAW may not be willing to give up more than it has offered. It believes that it has done enough by saying it will defer car maker contributions to its VEBA plans and sharply reduce job banks. A proposal for them to take less may cause a series of strikes that could push GM and Chrysler into Chapter 7 liquidations.

Otherwise, the idea of pre-packaged bankruptcy is just fine.

Douglas A. McIntyre is an editor at 247wallst.com.

Detroit: Chapter 11 finally on the table originally appeared on BloggingStocks on Thu, 04 Dec 2008 09:03:00 EST. Please see our terms for use of feeds.