There’s no doubt that are some serious financial repercussions in declaring bankruptcy, and there’s no question that your life will go through some considerable changes. If you’re in this situation, don’t be alarmed. The challenging economic times observed today means that a growing number of individuals are filing for bankruptcy. In reality, there are around 20,000 Australians every year that declare bankruptcy. So rest assured, you’re not alone.

This article was published in slightly different format in the January 2008 issue of Credit Magazine.

On February 28, 2013, the Versailles Court of Appeals adopted two new Safeguard Plans for CMBS borrower, Heart of la Défense SAS (HOLD), and its Luxembourg parent company, Dame Luxembourg SARL (Dame). By doing so, it confirmed that HOLD and Dame, even though they are holding companies or SPVs, can benefit from Safeguard Plans in order to restructure their indebtedness.

On March 8, 2011, France's highest court, the Cour de cassation, confirmed that CMBS borrower, Heart of la Défense SAS (Hold), and its Luxembourg parent company, Dame Luxembourg Sarl (Dame), were entitled to Court protection in France under Safeguard Proceedings (sauvegarde). Safeguard is a French bankruptcy process that resembles the U.S. Chapter 11 debtor-in-possession procedures, used most recently (and notably) in connection with the bankruptcies of General Motors and Lehman Brothers.

The recent Cour de Cassation ruling in respect of the safeguard proceedings opened by Heart of La Défense SAS ("SAS Holdco") and its parent company, Sarl Dame Luxembourg ("Dame"), overturned the earlier decision of the Paris Court of Appeal in February 2010. The decision reinstated the safeguard proceedings of the two companies that were initiated in November 2008.

In these trying times for our economy and our financial system, every business leader should pay attention to the company’s needs for working capital for the year and prepare for any potential problem related to its lack of liquidities.

When a debtor has multiple creditors, often it seems as if there is no alternative but to throw in the towel and file for bankruptcy. Bankruptcy does have some advantages in that an individual is released from all his or her existing debts and that in three years (as long as no objection is filed in the Court) is discharged from bankruptcy. There are however downsides to bankruptcy.

Summary

FSA is consulting on the need for certain financial services firms to prepare and maintain Recovery and Resolution Plans (RRPs) and in addition for some of these firms, and others, to make further preparations for their investment client money and custody assets (CMA) holdings.

Why now?

FSA has published a guidance consultation on the prudential treatment of liquidity swaps. According to the FSA, a liquidity swap involves a liquidity transformation. Typically they involve transactions between an insurer and a bank whereby high-credit quality, liquid assets (such as gilts) held by an insurer is exchanged with illiquid or less liquid assets (such as asset-backed securities (ABS)) held by a bank. The proposed guidance will apply to all regulated firms transacting liquidity swaps (not just banks and insurers) and the deadline for responses is 21 September 2011.

For debtors with limited liabilities, little surplus income and minimal gross assets, the new Debt Relief Order (DRO) is a further tool to consider in managing their debts. DROs, which came into force on 6 April 2009, are aimed at those who find they are unable to pay off their debts within a reasonable time but for whom other forms of debt relief, such as bankruptcy or Individual Voluntary Arrangements, are unavailable, or perhaps unaffordable.

What are the criteria for a DRO?

A DRO can be applied for where the debtor: