(623) 640-4945
Electric Vehicle Maker On The Brink Of Bankruptcy
Electric vehicles have grown in popularity for the past several years for various reasons. They are supposed to be better for the environment, which is a cause important enough to some to affect their choice of vehicle. A person who drives an electric vehicle can save a significant amount of money on gas. Electric vehicles even have special license plates that allow drivers to use the HOV lane, even if there is only one occupant in the vehicle. As it becomes more commonplace to drive electric vehicles, more charging stations become available which makes people feel more comfortable purchasing an electric vehicle. One would think that this automatically translates into increased profits for companies that produce and manufacture electric vehicles. But one electric vehicle maker has encountered obstacles and could be on the brink of bankruptcy. Read on to learn about this potential filing, as well as personal bankruptcy filings in the state of Arizona. If you’re looking for a skilled attorney to take your bankruptcy case in Phoenix or Tucson, call 623-640-4945 for your free consultation with our firm.
Fisker’s Potential Bankruptcy Filing
Fisker was founded by Danish automotive designed Henrik Fisker and is based out of Manhattan Beach, California. This company was started in 2016 after Fisker’s previous company, Fisker Automotive, went under. Fisker’s plan to revolutionize the automotive industry was dashed after the release of some extremely negative reviews of its vehicles. Technology reviewer Marques Brownlee made a video review of the company’s Ocean electric SUV which has more than 4 million views. He stated that it was the worst car he had ever reviewed citing issues like error messages on the dashboard screen, random beeping and blinking, and faulty cameras. Consumer Reports had similar opinions about the vehicle, calling it “both nauseating and jarring” and “the worst of both worlds.” This caused the company to halt sales of its shares, and the New York Stock Exchange even delisted the company’s stock due to abnormally low price levels.
Being delisted from the New York Stock Exchange can create massive issues for a business. In the face of being delisted, Fisker must buy back bonds due in 2026 and immediately pay off debts that were previously due in 2025. Fisker made a filing with the Securities and Exchange Commission to indicate that it does not have the assets to pay off all of these debts. On March 26, Fisker began reducing the prices of its vehicles. The subject of the negative reviews, the Ocean, was reduced by 40% to $37,499. With all of these negative financial indicators, it’s reasonable to predict that Fisker may soon be forced to declare bankruptcy.
Chapter 11 Bankruptcy For Large Companies
Chapter 11 bankruptcy can be used by individuals or companies, but it is mostly filed and discussed as a form of business bankruptcy. Financial experts expect that Fisker will file for chapter 11 bankruptcy because it is the type of bankruptcy used most often under these circumstances. A recent example is the June 2023 chapter 11 bankruptcy filing of fellow motor vehicle company Lordstown Motors. This company saw its value plummet by 35% after a botched investment from Taiwan-based company Foxconn. Foxconn only invested $52.7 million of a promised $170 million. Lordstown placed itself for sale with its chapter 11 bankruptcy filing. Now known as Nu Ride Inc, the vehicle maker intends to litigate its issues with Foxconn, as bankruptcy left it with more cash in the bank and a new board of directors.
Shutting down and reopening with a new company name isn’t unheard of in bankruptcy. It is also a strategy in chapter 7 bankruptcy, which many businesses avoid due to the requirement that the company shut down permanently. But many companies utilize chapter 11 specifically because it allows them to continue operating under the same name. When a debtor files for bankruptcy, a trustee will be assigned to oversee the case. In chapter 11 bankruptcy, the debtor’s primary creditors also assemble to form a committee. The committee has a great deal of authority in how the bankruptcy proceeds and changes to the business structure while the case is active. Small businesses can use a small business filing or a subchapter V filing to skip this process, but only if they meet certain debt limitations.
Choosing Between Chapter 7 & Chapter 13
With so many interested parties involved in a chapter 11 case, it is one of the most time-consuming and costly forms of bankruptcy. That’s why although it is an option for personal bankruptcy, the vast majority of people choose between chapter 7 and chapter 13. Chapter 7 and chapter 13 have their own eligibility requirements as well as their own benefits and drawbacks. If you are having trouble deciding between the two, call 623-640-4945 for your free consultation with our Arizona bankruptcy firm.
Chapter 7 bankruptcy is a quick and effective tool for debt relief. The process only takes about 3-6 months, which is much faster than other forms of bankruptcy and debt relief in general. There are few requirements of the debtor after they have filed their petition, completed their credit counseling courses, and attended the 341 Meeting of Creditors. Chapter 7 bankruptcy wipes out unsecured debt without priority status. Common examples of debts that are cleared by chapter 7 include credit cards, personal loans, unpaid rent and bills, medical bills, and repossession deficiency balances. Some taxes can be cleared by chapter 7 bankruptcy, but some have priority status, which makes them ineligible for discharge. Other debts that can’t be discharged in a chapter 7 include a home mortgage, an auto loan for a vehicle that you keep, student loans, and child support. Chapter 7 has strict income qualification rules, and the debtor needs to show the court that they earn less than the state median income or pass the Means Test in order to qualify.
Chapter 13 bankruptcy isn’t as fast as chapter 7, but doesn’t have as strict eligibility requirements and can help the debtor address secured and priority debts that would be unaffected by a chapter 7 filing. Instead of erasing debts, chapter 13 restructures debts into a payment plan of 3 or 5 years. This gives a debtor more time to catch up on secured debts to stop a foreclosure or repossession. It also can clear secondary home mortgages under certain circumstances. The debtor will be protected from creditors and some of their unsecured nonpriority debts can be cleared when the payment plan is complete.
Need Help Deciding If Bankruptcy Is Right For You? Start Here.
All types of businesses, from restaurants to electric vehicle makers, have been struggling since the pandemic. If you are having troubles making ends meet, you deserve more information about your debt relief options. Our Arizona bankruptcy lawyers can assess your situation to determine if bankruptcy is a fit and which chapter you should file. If you’re seeking quality representation in the Phoenix or Tucson area, we can provide you with an affordable payment plan option starting as low as Glendale Bankruptcy Attorney. To get started today with your free phone consultation, contact us or call 623-640-4945.
