Bankruptcy Filings Research Articles

Does Personal Financial Distress Affect Workers’ Performance? Evidence From Real Estate Agents

This study examines how personal financial distress affects workers’ performance. Using the real estate brokerage industry as a setting and personal bankruptcy filing as a proxy for personal financial distress, we find that sale prices of agent-represented houses are lower in the year when agents are financially distressed than the non-distressed year, relative to the control group. We also find that the less desirable sales’ outcomes induced by distressed agents spill over to homeowners’ future buying activities. These owners subsequently buy houses with higher loan-to-value (LTV) ratios in lower-quality neighborhoods.

Legal Responsibility of the Insurance Company for Unpaid Participant Claims

Insurance is a financial institution that has a vital role in the economy. Insurance protects the public from various risks, such as accidents, illness, and death. The insurance company must pay claims to insurance participants who experience losses in an insurance agreement. However, in practice, claims are often rejected by insurance companies. The purpose of this research is to analyze the legal responsibility of insurance companies for unpaid participant claims. This research uses normative legal research methods. Research data was obtained through a literature study. Research data was analyzed qualitatively using descriptive analysis methods. The research results show that insurance companies that reject insurance participants' claims can be subject to civil and criminal legal responsibility. If the participant's claim is not paid, the participant can file for bankruptcy through court. The regulations that provide the legal umbrella for protecting insurance participants consist of Law Number 8 of 1999 concerning Consumer Protection, Law Number 40 of 2014 concerning Insurance, Decree of the Minister of Finance No. 422/KMK.06/2003 concerning the Implementation of Insurance Business and Reinsurance Companies, and Financial Services Authority Regulation Number 23/POJK.05/2015 concerning Insurance Products and Marketing of Insurance Products. Legal protection for insurance policyholders as consumers are regulated in the Insurance Law and the Consumer Protection Law.

KAPASITAS PENJAMIN PERORANGAN DALAM SENGKETA KEPAILITAN

The guarantor agreement/individual guarantor or personal guarantor often requires the guarantor to relinquish his rights as a personal guarantor so that the consequences of the personal guarantee result in bankruptcy. Various decisions on bankruptcy petitions state that the personal guarantor can be made bankrupt, so that the guarantor as referred to in article 1 paragraph 1 of the Bankruptcy Law must release all his assets into general confiscation to pay off creditor payments. The main problem that will be studied is the position of the guarantor, in this case the personal guarantee, which is used as a bankruptcy debtor. The purpose of writing this journal is to analyze the capacity of personal guarantees made by bankrupt debtors the same as the main debtor because at the time of making the guarantee deed the guarantor was willing to voluntarily relinquish all his privileges without waiting for the main debtor to default and his assets to be sold. This journal is normative juridical research, with a statutory approach and a case approach. In this journal, it was found that making a guarantee deed means that the position of a guarantor who can be made bankrupt is a weak position in an agreement, so the role of the notary must be to be able to provide legal counseling before the personal guarantor signs the guarantee deed. The result of this study is that Personal Guarantee as a guarantor of bankruptcy has an equivalent status with the main debtor because in making the deed of guarantee, the guarantor has agreed to release his privileges without waiting for the default of the main debtor. If the main debtor's debt is not met, the creditor can file bankruptcy against the guarantor (Personal Guarantee or Corporate Guarantee) in accordance with the bankruptcy law. In the agreement, it is important for all parties (creditor, notary and debtor) to understand the risks that may arise when the guarantor signs the deed of guarantee

Juridical Analysis of the Legal Standing of Insurance Companies Creditors in Bankruptcy and Suspension of Debt Payment Obligations Application

This article aims to discuss and analyze the legal position of insurance company debtors in bankruptcy and PKPU proceedings. It also seeks to explore further the rationale and objectives of conferring the authority to file bankruptcy or PKPU proceedings for insurance companies on OJK. The research applies normative juridical research method. The article concludes that since the issuance of Law Number 21 of 2011 concerning the Financial Services Authority was issued, the authority over insurance companies, including the legal standing for bankruptcy application, was transferred to OJK. Such stipulation is reaffirmed in Law Number 40 of 2014 concerning insurance. The authority of OJK on bankruptcy applications for insurance companies is justified to protect the public interest. Even though the applicable legal provisions do not explicitly state that the specific requirement for bankruptcy applications against insurance companies also apply to PKPU proceedings, it should also apply mutatis to PKPU proceedings. Both proceedings against insurance companies might have an impact on the economy. In both bankruptcy and PKPU proceedings, equal treatment should not be given to creditors because the interests of the state are greater than those of the creditors. Therefore, the authority of the OJK to file for bankruptcy of insurance companies must be interpreted as the authority to file for PKPU for insurance companies.
 Keywords: bankruptcy, suspension of debt payment obligations, insurance

Bankruptcy Resolution: Misery or Strategy

Contrary to conventional wisdom, this study reports a positive relationship between large US firms' leverage levels and their likelihood of emerging from Chapter 11 bankruptcy. In anticipation of a favourable court outcome, which allows them to emerge from bankruptcy with reduced debt, firms tend to increase their leverage levels in the years preceding the bankruptcy filing year. This suggests strategic abuse of bankruptcy courts and creditors. Test results suggest that firms start acting strategically up to four years before filing for bankruptcy so that they can emerge with a reduced debt burden at the cost of creditors. Additionally, our study also contributes to the corporate bankruptcy literature by exploring a set of factors (related to the firm, judicial, case, geographic, and macroeconomic characteristics) explaining the likelihood of firms emerging from bankruptcy, and proposing a parsimonious multivariate model that best predicts the likelihood of surviving Chapter 11 bankruptcy.

Section 363 Sales and Their Blind Faith in the Markets

Airlines tend to go bankrupt. In fact, all the so-called legacy carriers have gone bankrupt at one time or another. What leads these airlines into financial distress varies from case to case. Sometimes they are overrun by costs, and other times they lack sufficient demand. The concern of this paper, though, is not why airlines file bankruptcy—it is assumed that, from time to time, airlines will face financial distress and will require the protection of the U.S. Bankruptcy Code (the Code). Instead, this paper will examine how large firms such as airlines are navigating bankruptcies today. After providing some overview of the current landscape of large Chapter 11 cases—specifically in the realm of § 363 asset sales and the debates surrounding these sales—this paper will argue that the theories supporting the continued use of these sales are suspect and should be met with skepticism by the courts and by policymakers, and, additionally, that these sales often undermine the policy objectives of the Code in general. Finally, this paper will look at how these debates are shaping future bankruptcy policy and will argue in favor of proposed legislation from Senator Manchin of West Virginia amending § 363 of the Code.

The Trigger and Application of Black Swan Events: A Case Study of Silicon Valley Bank Failures

On March 10, 2023, Federal regulators shut down Silicon Valley Bank, the 16th-largest bank in the country. As a result of the significant run, the bank was forced to file for bankruptcy. The purpose of this paper is to analyze the borrowing and triggering factors of black swan events by taking the Silicon Valley Bank bankruptcy event as an example, and to discuss the revelations and reflections of black swan events from the perspective of risk management based on the definition and characteristics of black swan events. Black swan events are those rare, unpredictable events with great impact, while bank bankruptcy events imply significant changes in the stability of the financial system. The failure of Silicon Valley Bank exposed the vulnerability of the banking sector and raised depositors' concerns about bank withdrawals and the cash flow crisis of global technology companies. Thus, the failure of Silicon Valley Bank has important lessons for future bank management and regulation. This paper argues that for most people, the failure of Silicon Valley Bank was not a black swan event, but even for many professionals, the impact of bank failures is unpredictable.

Financial, demographic, and psychological differences between chapter 13 bankruptcy filers and non-filers

This study finds financial, demographic, and psychological differences between Chapter 13 filers and non-filers. Financial training reduces the likelihood of filing for personal bankruptcy. Males are twice as likely as females to be filers. Blacks are twice as likely as Whites to be filers. A single per- son is 38% less likely to file than a married person. Homeowners are five times as likely as renters to be filers. Increases in education, religious commitment, and parents’ income reduce the likelihood of filing. Increases in the psychological factors, self-efficacy, locus of control, and self-control, reduce the likelihood of filing for Chapter 13 bankruptcies. These results can be used to influence public policy to reduce personal bankruptcy.

Default and Bankruptcy Resolution in China

In this article, we review the literature on the recent growth of corporate debt in China and present stylized facts on the evolution of debt composition, nonperforming loans, defaults, and bankruptcy filings. We then describe the legal and political institutions that characterize the system for restructuring and liquidating financially distressed firms, including recent reforms of China's bankruptcy law. Finally, we discuss the main challenges faced by China in the implementation of these reforms, including frictions in judicial enforcement. We also propose potential avenues for future research.

Tinjauan Yuridis Pailitnya PT. Merpati Nusantara Airlines Persero Akibat Kelalaian Terhadap Perjanjian Damai

Law No. 37/2004 on Bankruptcy and PKPU has regulated the bankruptcy and PKPU process for SOEs, where the Ministry of Finance is authorized to file bankruptcy applications. The problem that the author wants to raise regarding the differences in the bankruptcy of BUMN Persero, in this discussion is the bankruptcy case of PT Merpati Nusantara Airlines (PT MNA). Based on the explanation of the Bankruptcy and PKPU Law article 2 paragraph (5), it is stated that BUMNs that can be bankrupted by the minister of finance are BUMNs whose capital is not divided into shares or BUMN Perum, while in practice at the trial the bankruptcy of PT MNA was canceled on the grounds that the BUMN (Persero) could only be bankrupted by the Minister of Finance. Whereas BUMN Persero is subject to the Limited Liability Company Law and is also subject to the Limited Liability Company Law, this is because the arrangements regarding the bankruptcy of BUMN are still overlapping, resulting in inconsistencies in the decisions of judges in examining and deciding BUMN bankruptcy cases. The writing of this article uses normative legal research, using primary legal sources, namely the Bankruptcy Law, Limited Liability Company Law and BUMN Law. The data collection technique in this research is a literature study, namely collecting primary legal materials by tracing laws and regulations related to the position of bankrupt BUMN Persero. Furthermore, secondary legal materials are obtained by collecting books, scientific papers, and journals relevant to the author's research. Using deductive pattern as an analysis method by connecting major and minor premises. The result of this research is that PT MNA, even though it is a Persero SOE and its shares are 100% owned by the government, can still be bankrupted by anyone other than the minister of finance as long as it meets the bankruptcy requirements and the bankruptcy decision of PT MNA which is in accordance with the Bankruptcy and PKPU Law is based on 2 articles of the PKPU Law, namely Article 170 paragraph (1) and Article 291 paragraph (2).

The Death of an Insolvent Entrepreneur in the Light of Bankruptcy Law Regulations

Abstract This study aims to identify and analyse the specific regulations of the Bankruptcy Law to the extent that they relate to the death of an insolvent debtor. The authors attempt to determine the correct interpretation de lege lata, and where it is justified, draw conclusions de lege ferenda. Due to the fact that regulations must be interpreted together with the provisions of inheritance law and other regulations, their correct interpretation may be difficult. This study contains an analysis of three possible cases: when death occurred after the filing of a bankruptcy petition, during the course of bankruptcy proceedings, but also on the brink of bankruptcy before the petition was filed by an authorized person. In the event of death after filing for bankruptcy or after its declaration, the problem is essentially of a procedural nature and is generally resolved by identifying the persons participating in the proceedings (usually a trustee). On the other hand, in the event of the death of an insolvent entrepreneur before they file for bankruptcy, the Bankruptcy Law provides for a separate procedure. At the same time, it seems that due to the distinctness of this situation, the introduction of a different, specific definition of insolvency is justified, which the authors present in this study.

The effect of the Affordable Care Act Medicaid expansion on consumer bankruptcies

AbstractMedical expenses have been associated with a large proportion of consumer bankruptcies in the United States. The objective of this study is to examine the relationship between the Medicaid expansion implemented in the context of the Affordable Care Act and consumer bankruptcy, overall and by chapter filing. We used a longitudinal study design with a study period of 2008–2017. We tested three approaches: difference‐in‐differences, fixed effect panel linear regression, and triple difference. We constructed a panel dataset from 2008 to 2017 with states’ data using data from various sources on insurance, bankruptcy filings, and characteristics that may affect bankruptcy, such as income and ethnicity. The outcomes were the annual rates of consumer bankruptcies overall and by chapter at the state level. Between 2008 and 2017, the overall unadjusted bankruptcy filing rate fell from 0.36% to 0.24%. We found that the expansion was associated with a decrease in overall consumer bankruptcy varying between 0.035 and 0.039 percentage points and that the intensity of the effect was modulated by the intensity of the treatment. Results were consistent across models and suggest that the Medicaid expansion had a significant negative effect on overall bankruptcy filings and specifically on Chapter 7 filings.

Municipal bankruptcies and crime

While the importance of municipal bonds for the provision of public services is well-documented, the consequences of municipal bankruptcies remain understudied. We contribute to this literature by studying the effects of municipal bankruptcies on crime. Using the staggered difference-in-differences approach and agency-level crime data, we find that violent and property crime rates rise after successful (approved by the bankruptcy courts) Chapter 9 bankruptcy filings. The association between successful municipal bankruptcy and crime remains robust to alternative estimation methods, including a novel empirical technique that allows for the treatment effect heterogeneity and dynamics, and several robustness checks and falsification exercises. Our exploratory evidence suggests that the rise in crime rates is due to lower public safety expenditures. Our findings highlight the importance of efficient financial management for local government entities and the need for particular attention to law and order in the local jurisdiction going through bankruptcy.

Effect of cash flow risk on corporate failures, and the moderating role of earnings management and abnormal compensation

In this study, we find that United States firms' average cash flow risk (CFR) shows a significantly increasing trend over the past four decades or so. This does not portend well considering the significance of cash flows in maintaining a firm's financial health and going concern status. The CFR also increases dramatically for firms approaching financial distress or bankruptcy, suggesting its important role in predicting a firm's failure. Empirically, we find that CFR has a strong positive effect on a firm's financial distress likelihood. We also find that the association between CFR and financial distress is negatively moderated in firms with high earnings management and abnormal compensation. The results suggest that managers in firms with high CFR are more likely to use heuristics in form of earnings management. Thus, supporting the upper echelons theory related to managers under performance pressure. Meanwhile, consistent with the notion in the agency theory that financial incentives serve as effective monitoring mechanisms, compensation packages can incentivize better risk management practices and decrease the likelihood of a firm's failure. Our findings are also robust to alternative definitions of a firm's failure: financial constraints, presumed debt covenant violation and legal bankruptcy filings.

Justice Aspects of Financial Service Authorities’s Competence for Bankruptcy and PKPU of Financial Service Institutions Based on Law No. 4 Year 2023

The Law on the Development and Strengthening of the Financial Sector was legalized by President Joko Widodo. The Act is known as Law No. 4 of 2023 often known as the P2SK Law, which stipulates that the Financial Services Authority or Otoritas Jasa Keuangan (OJK) is the only party that has the authority to file for bankruptcy and postpone debt payment obligations for financial service institutions. This research will provide novelty, especially on the definition of justice in the financial services sector, especially related to the interests of consumers and creditors with regulatory authority.This right has eliminated the creditor rights of insolvent financial service institutions. Creditors do not have any rights or legal action against defaulting or insolvent financial institutions. This research aims to examine the authority of OJK over bankruptcy and PKPU of Financial Services Institutions and justice for other creditors dan consumers according to the OJK’S authority. This researchers employed the normative juridical method. This study concluded that the authority of the OJK must be reviewed with consideration of the authority already possessed by the OJK, practical conditions in the business world specifically for financial service institutions, and the position and rights of creditors for loans to financial service institutions. The results of the study also found that the authority of the Financial Services Authority did not reflect the value of justice for consumers and creditors

Analysis of Judgement on Cancellation of Bankruptcy of Intidana Saving and Loan Cooperative (Review of the Authority to File for Bankruptcy and PKPU against Cooperatives)

ABSTRACT Purpose: This scientific paper aims to analyze the review of the cancellation of the Intidana Cooperative bankruptcy associated with the authority to submit bankruptcy and PKPU to the cooperative. Methodology: Using normative legal research methods, this study examined primary legal materials, including Law Number 37 of 2004 concerning Bankruptcy and PKPU, Law Number 25 of 1992 concerning Cooperatives, and Decision Number 43 PK/Pdt.Sus-Pailit/2022, as well as secondary journals, books, and scientific publications related to cooperative bankruptcy. Results: Bankruptcy proceedings against cooperatives do not have any special requirements, like those against other institutions such as banks, securities companies, stock exchanges, clearing and guarantee agencies, and other institutions. In this case, a cooperative can be petitioned for bankruptcy in the Commercial Court if it has two or more creditors and against whom a debt that is due and collectible has not been paid. The application can be filed by 2 (two) parties, namely the cooperative itself as the debtor and its creditors. The absence of regulations governing the mechanism for filing for bankruptcy in cooperatives has a negative impact on the sustainability of cooperatives. Currently, many problematic cooperatives are filing for bankruptcy and PKPU. One of the problematic cooperatives that the authors are currently studying is the Intidana Cooperative. To overcome the problems in these troubled cooperatives, the government issued SEMA Number 1 of 2022 on the Special Civil Chamber Law Formulation regarding Bankruptcy and Suspension of Debt Payment Obligations for Cooperatives, where applications for bankruptcy and PKPU statements against cooperatives can only be submitted by the Minister in charge of government affairs in the field of cooperatives, i.e., the Minister of Cooperatives and SMEs and Cooperatives that run the business of Microfinance Institutions whose licenses are from OJK can only be submitted by OJK. Applications of the study: The government is expected to immediately make changes to the Bankruptcy Law and the Cooperatives Law in terms of the mechanism for filing bankruptcy and PKPU for cooperatives, determining clear and firm boundaries between open loop and close loop cooperatives, and where OJK will supervise cooperatives that carry out financial services business activities. Novelty/Originality of this study: Analyzing the decision of the judge's cancellation of the Intidana Cooperative Bankruptcy in the Decision of Reconsideration is associated with the authority to submit bankruptcy and PKPU in SEMA Number 1 of 2022. Keywords: Decision, Bankruptcy, Cooperative. ABSTRAK Tujuan: Tulisan ilmiah ini bertujuan untuk menganalisis kajian pembatalan pailit Koperasi Intidana terkait dengan kewenangan mengajukan pailit dan PKPU kepada koperasi. Metodologi: Dengan menggunakan metode penelitian hukum normatif, penelitian ini mengkaji bahan hukum primer, antara lain Undang-Undang Nomor 37 Tahun 2004 tentang Kepailitan dan PKPU, Undang-Undang Nomor 25 Tahun 1992 tentang Perkoperasian, dan Putusan Nomor 43 PK/Pdt.Sus-Pailit/2022, serta jurnal sekunder, buku, dan publikasi ilmiah yang berkaitan dengan kepailitan koperasi. Temuan: Perkara pailit terhadap koperasi tidak memiliki persyaratan khusus, seperti terhadap lembaga lain yakni bank, perusahaan sekuritas, bursa efek, lembaga kliring dan penjaminan, dan lembaga lainnya. Dalam hal ini, koperasi dapat dimohonkan pailit di Pengadilan Niaga jika mempunyai dua atau lebih kreditur dan terhadapnya suatu utang yang telah jatuh tempo dan dapat ditagih belum dibayar. Permohonan dapat diajukan oleh 2 (dua) pihak, yaitu koperasi itu sendiri sebagai debitur dan krediturnya. Tidak adanya peraturan yang mengatur tentang mekanisme pengajuan pailit pada koperasi berdampak negatif terhadap keberlangsungan koperasi. Saat ini, banyak koperasi bermasalah yang mengajukan pailit dan PKPU. Salah satu koperasi bermasalah yang sedang dikaji oleh penulis adalah Koperasi Intidana. Untuk mengatasi permasalahan pada koperasi bermasalah tersebut, pemerintah menerbitkan SEMA Nomor 1 Tahun 2022 tentang Perumusan Undang-undang Kamar Perdata Khusus tentang Kepailitan dan Penundaan Kewajiban Pembayaran Utang Koperasi, dimana permohonan pailit dan pernyataan PKPU terhadap koperasi hanya dapat diajukan oleh Menteri yang menyelenggarakan urusan pemerintahan di bidang koperasi, yaitu Menteri Koperasi dan UKM yang menyelenggarakan usaha Lembaga Keuangan Mikro, dimana izin dari OJK hanya dapat diajukan oleh OJK. Kegunaan: Pemerintah diharapkan segera melakukan perubahan terhadap UU Kepailitan dan UU Koperasi dalam hal mekanisme pengajuan pailit dan PKPU bagi koperasi, penetapan batasan yang jelas dan tegas antara koperasi open loop dan close loop, dan keberadaan OJK akan mengawasi koperasi yang melakukan kegiatan usaha jasa keuangan. Kebaruan/Originalitas: Menelaah Putusan Hakim Pembatalan Pailit Koperasi Intidana dalam Putusan Peninjauan Kembali dikaitkan dengan kewenangan mengajukan Pailit dan PKPU dalam SEMA Nomor 1 Tahun 2022. Kata kunci: Putusan, Pailit, Koperasi

Venator files for bankruptcy as part of recapitalisation plan

Venator files for bankruptcy as part of recapitalisation plan

Venator files for bankruptcy

Venator Materials, the struggling former titanium dioxide business of Huntsman, has filed for Chapter 11 bankruptcy. The company has already reached an agreement with creditors, who will convert Venator’s debt into equity. The company is also getting $275 million in new financing to run its business. Venator expects to complete its bankruptcy process in about 2 months. Venator had about $1 billion in debt on its balance sheet. It lost money for the past 3 years and has recently been grappling with sluggish demand and high energy costs. Venator lost $188 million on $2.2 billion in sales in 2022.

Venator files for bankruptcy

Venator files for bankruptcy

The macroeconomic effects of endogenous credit and money creation under Basel III regulations

AbstractBank regulations affect the behaviour of credit and money creation; hence, they are essential for economic growth and stability. This paper develops an analytical model of the monetary circuit to show the macroeconomic effects of money creation under bank regulations. It describes the equilibrium in which banks create money in accordance with capital adequacy ratios or net stable funding ratios. This study reveals the equilibrium economic growth rate and debt level. In addition, this paper demonstrates how bank regulations influence firm capital structures, and the conditions for firms using debt and filing for bankruptcy. Results show that bank regulations can transfer risk from banks to firms. In fact, this study identifies a channel through which banks actively influence the macroeconomy through their money creation.