Gawker Media recently filed for Chapter 11 bankruptcy protection as a result of being ordered to pay roughly $140 million to Hulk Hogan. The media company has put its assets up for sale and looks to be wooing Ziff Davis, the digital publisher of AskMen, _PCMag _and Computer Shopper as a potential buyer.
Gawker Files for Bankruptcy
Hulk Hogan, real name Terry Bollea, sued Gawker for damages and violating his privacy for $100 million after the site posted a video in 2012 of him having sex with his former best friend’s wife. A Florida jury awarded Hogan $55 million for economic injuries and another $65 million for emotional distress. Additionally, Gawker has been ordered to pay $25 million in punitive damages.
As a result, the media company has filed for Chapter 11 bankruptcy protection.
Ziff Davis, who is already familiar with the world Gawker operates in, placed a$100 million bid for the company’s assets prior to the bankruptcy auction that will be supervised by a bankruptcy court most likely in late July.
Ziff Davis has plans to buy Gawker’s blogs, which include Gizmodo, _Lifehacker _and Deadspin — but not assume the company’s liabilities — if no other offer emerges during the auction. A bankruptcy court will first need to approve the sale’s price and terms.
Gawker’s properties_ _are expected to continue operations during the bankruptcy proceedings.
Gawker listed estimated assets of $50 million to $100 million and liabilities of $100 million to $500 million.
Hogan is Largest Creditor
Hogan was listed as the company’s largest creditor in its bankruptcy filing among other creditors including the following: law firm Morrison Cohen; insurance brokerage Risk Strategies; content-distribution firm SimpleReach; and Google.
Hogan Backed by Billionaire Peter Thiel
The case took an interesting turn when it was revealed that Hogan was backed by billionaire and co-founder of PayPal, Peter Thiel. Thiel recently admitted to backing Hogan’s lawsuit with $10 million because, as he told The New York Times, the site was “getting attention by bullying people even when there was no connection with the public interest.”
Following Gawker’s bankruptcy announcement, Hogan tweeted: “What a beautiful day, and the good doesn’t prevent the better! In the present I AM always grateful, only good happens to me.”
Not a Surprise
The fact that Gawker filed for Chapter 11 comes as no surprise. It’s not uncommon for large companies and even celebrities like 50 Cent to file for bankruptcy protection following court orders demanding large amounts of money.
Often times debtors will file an emergency bankruptcy file as a quick method for invoking an automatic stay. An automatic stay is a motion that protects debtors from all people that are seeking money, including damages. An automatic stay can be a great form of protection for those who are facing paying large settlement payments. Automatic stays are also initiated when you file for bankruptcy.
Often times a debtor will need the protection of an automatic stay immediately, and thus not have the time to wait to complete the majority of necessary bankruptcy forms. In these instances, an emergency bankruptcy can help desperate debtors.
Filing an Emergency Bankruptcy
An emergency bankruptcy can be filed by filling out the following forms: Form 1, Voluntary Petition, the Mailing Matrix, and Form 21, which is a Statement of Social Security Number. A debtor might also be required to fill out Order Dismissing Chapter 7 Case. This form is processed if a debtor fails to file the remainder of the bankruptcy forms within 14 days.
If the 14 days expires, a debtor is able to file again. Additionally, a debtor will need to ask the court to keep the automatic stay in effect once 30 days have passed following the filing
Steps of an Emergency Bankruptcy Filing
Consult with the court or a bankruptcy attorney to ensure that you have all the forms needed for an emergency filing.
Fill out the correct forms
List all creditors. This includes: collection agencies, sheriffs, attorneys, and all others that are seeking to collect.
Make copies of all paperwork for yourself.
File the originals and any required number of copies along with the set fee and a self-addressed envelope with the bankruptcy court.
Ensure that you have filed all other required forms within 14 days of your emergency filing.
The Chapter 11 Bankruptcy Filing Process
The Chapter 11 bankruptcy process begins with the filing of a petition in bankruptcy court. Typically the debtor in these cases are corporations, partnerships, and limited liability companies. It should be noted that individuals are able to file Chapter 11 if they have too much debt or income to be able to qualify to file for Chapters 7 and 13.
While Chapter 11 is usually voluntary, sometimes creditors will file an involuntary Chapter 11 against a defaulting debtor.
Typically a debtor will file Chapter 11 where their primary place of business is located, but debtors are also able to file where they are “domiciled.” This just means where the business is incorporated or otherwise organized. The process can take anywhere from a few months to be finished, or can continue up to six months to two years.
Business Operations Typically Continue But Court Handles Major Decisions
While most Chapter 7 cases require that a trustee be appointed, a trustee is usually not appointed in Chapter 11. Rather, a debtor will continue day-to-day business operations as a “debtor in possession” (DIP). A bankruptcy court is able to appoint a trustee if it feels that the debtor has committed fraud, dishonesty, incompetence, or gross mismanagement of the debtor’s affairs.
Though a debtor is able to continue business operations, most major decisions are handed over to a bankruptcy court. Additionally, the bankruptcy court must approve the following:
any sale of assets, including property or real property. This excludes inventory sold by a retail debtor during ordinary course of business
either entering or breaking a lease of real or personal property
mortgages or other secured financing arrangements thatwill allow a debtor to borrow money after the bankruptcy case is filed
shutting down business operations
expanding business operations
entering or modifying contracts and agreements with unions, vendors, licensees or others and,
retention of and payment of fees and expenses to attorneys and other professionals.
Creditors Support or Oppose
Creditors, shareholders, and any other parties that hold an interest in the company have the option of either supporting or opposing actions requiring bankruptcy court approval. And the bankruptcy court must consider input from creditors, shareholders, and all other parties with an interest when deciding on how to proceed with the bankruptcy.
Unsecured Debt is not associated with a specific piece of property, which means that there is not specific property that serves as collateral for the debt. Unsecured creditors are able to participate in a Chapter 11 case through a committee that is appointed to represent all of the unsecured creditor’s interests.
Chapter 11 Reorganization Plan
A debtor typically has four months after filing Chapter 11 to propose a reorganization plan. These four months are usually considered exclusive, meaning that the debtor has the exclusive right to come up with the plan. This plan can also be extended or shortened.
After that “exclusivity period” expires, the creditors’ committee is able to propose a reorganization plan, although this is rare. Typically if creditors are dissatisfied with the debtor’s proposed plan, it will move to dismiss or convert the case to Chapter 7.
Confirmation of Chapter 11 Plan
Once a plan is approved it is referred to as “confirmation.” For a Chapter 11 plan to be confirmed, the plan must meet a number of requirements, including:
Feasibility. The proposed plan must be likely to succeed. This means that a debtor must be able to prove to the court that it will be able to raise enough revenue to cover its expenses over the plan term. This includes making all payments to creditors.
Good Faith. The plan must be proposed in good faith and not by means forbidden under applicable law.
Best Interests of Creditors. The plan must be in the best interests of its creditors. This means that creditors will receive as much in Chapter 11 as they would have if the debtor had gone through Chapter 7. Sometimes this means that a debtor will be required to pay creditors in full rather than just a fraction of what is owed.
Fair and Equitable. The plan must be deemed “fair and equitable” under the “fair and equitable” test. This means the following must be met:
Secured creditors (creditors that have a mortgage against real property or a lien against personal property included inventory or equipment) must be paid, over time, at least the value of their collateral.
The debtor is not able to retain anything on account of their equity interests unless all debts are paid in full. These debts can either be paid immediately following the confirmation of the plan, or over time. If paid over time, interest must be included. The bankruptcy court is able to allow equity holders (creditors) to retain ownership interests in the debtor in exchange for any “new money” that is contributed to pay expenses associated with reorganization of the debt. If this is not enabled by the court, equity holders lose all ownership rights once the reorganization plan is confirmed.
Some of the confirmation requirements apply only if the creditors vote against the proposed reorganization plan.
Working with a Bankruptcy Attorney
Attorney Ben Wright has the experience, skill and knowledge necessary to guide you through steps involved with a Chapter 11 bankruptcy. We will thoroughly review the financial situation of your business and if Chapter 11 is appropriate, prepare the petition and required schedules and documentation required by the bankruptcy court, including:
Schedule of assets and liability
Schedule of current income and expenditures
Schedule of executory contracts and unexpired leases
Statement of financial affairs
For individual filers, we will also provide a certificate of credit counseling and evidence of payment from employers, along with a statement of monthly net income and anticipated changes.
Bankruptcy can be an overwhelming process. That’s why we advise that you work with a phoenix chapter 11 bankruptcy lawyer that is familiar with various debt repayment options. We are committed to helping our clients understand their rights and options under the bankruptcy law and developing the debt relief solution that makes the most sense for each individual. We invite you to call (602) 648-3274 or contact our Arizona office to schedule a free initial consultation.
AZBK Lawyers 668 N. 44th St., Ste 320, Phoenix, AZ 85008 (602) 648-3274