The first week of December 2018 saw the governing body for Gymnastics in the US filing a voluntary petition for Chapter 11 bankruptcy. The abrupt bankruptcy filing is, in the words of its new Board of Directors, to help deal with the litigation aimed at the organization due to the actions of former team doctor Larry Nassar. The Chapter 11 bankruptcy should assist the organization in continuing its normal operations while working with creditors to reorganize debt.
Chapter 11 and Lawsuits
When an organization such as the USA Gymnastics files Chapter 11 bankruptcy, all lawsuits involving any type of financial restitution or monetary damages are placed on immediate hold pending the emergence from bankruptcy. Subsequently, the USAG’s bankruptcy will affect the 350 victims who bought a total of 100 lawsuits against the USAG in the wake of the Larry Nassar scandal. The automatic stay imposed by bankruptcy will also postpone payments to all other creditors as well. The victims who brought lawsuits against the USAG suggest that the organization was complicit in the crimes of their disgraced physician, and will no doubt be upset by the uncertainty the bankruptcy case will be with regards to the pending multimillion-dollar settlement.
The USAG Bankruptcy Case
Bankruptcy Attorneys filed bankruptcy paperwork in the U.S. Bankruptcy Court this week in an effort to gain the time necessary to readjust the organization’s debts. The automatic stay will also provide the USAG protection against administrative proceedings and any pending property repossessions. The news of the bankruptcy case is also of extreme interest to the US Olympic Committee which has sought to strip the national gymnastics body of its status within the Olympic community.
Chapter 11 Proceedings
Chapter 11 proceedings can take months and sometimes even years to reach a conclusion. Chapter 11 bankruptcy laws differ from Chapter 7 liquidation in the aspect that the USAG will be able to continue its operations during this period. This aspect makes Chapter 11 a critical lifeline for businesses that need extra time to pay debt obligations or to renegotiate certain debts with creditors. Houston bankruptcy attorneys who specialize in business bankruptcies are uniquely equipped to help such organizations navigate the myriad of issues that companies face when seeking this form of debt relief.