When it comes to bankruptcy, individuals are not the only ones who can file: businesses can file as well. Business bankruptcy is typically far different from consumer bankruptcy. While individuals, with the help of a West Virginia bankruptcy attorney, might have to determine whether to liquidate certain assets (if they have a Chapter 7) or a plan to pay off creditors over a three-to-five year period (if they have a Chapter 13), businesses that file for bankruptcy get restructured. That is important to note, because people commonly believe that when businesses file for bankruptcy, the businesses are finished. That is not the case. Instead, under Chapter 11 bankruptcy, the business keeps running, but is overseen by a “debtor-in-possession” — usually an officer of the business — acting under the supervision of the court. The debtor-in-possession then proposes a plan of reorganization that requires the approval of the court and creditors. The business is restructured in such a way that it can pay off creditors over a period of time. While that prevents the business from going under completely, it can have a profound impact upon the business’s employees and vendors.
Such was the case for retired coal mine workers for Patriot Coal, which recently filed for bankruptcy. These workers sent handwritten letters to the federal bankruptcy court in New York, where Patriot Coal’s bankruptcy was filed, expressing concern that the bankruptcy could impact their retirement pensions. One widow expressed concern that if Patriot Coal could shed its liability for pensions, she would need to sell her home to pay for medical expenses. Patriot Coal is the employer of 2,000 union members in West Virginia and Kentucky, and is currently responsible for over 10,000 retirees, as well as 10,000 dependents, spread across West Virginia, Ohio, Indiana, Illinois, and Kentucky.
The United Mine Workers Union hopes to have the case moved to Charleston, West Virginia to prevent Patriot Coal from shedding its liability. Other businesses have been able to shed their liabilities through bankruptcy restructuring, such as United Air in 2005. Even though the Deficit Reduction Act, signed into law in 2006, limits businesses’ ability to shed pensions, a business can still do so if it can convince a bankruptcy judge that it is the only way to restructure. The federal Pension Benefits Guaranty Corporation, as insurer of traditional company pensions, then takes over and pays the benefits up to statutory limits. When the Pension Benefits Guaranty Corporation takes over, the pension benefits guarantee is frozen as of the day of the bankruptcy filing, even if the plan does not terminate for months or even years. Moreover, the Pension Benefits Guaranty Corporation is itself struggling to remain solvent. Right now, it has a pension benefits deficit of $26 billion.
No one who has worked hard over the years, and who has been taught to expect a decent retirement, should have to put up with so much uncertainty. We at the Wolfe Law Firm hope that the New York judge takes the retired workers’ stories into account, or — barring that — that the case is transferred to West Virginia.