April 8th of this year was the day ATA shut down. Company founder George Mikelsons had stepped down three years earlier, but apparently his debts didn’t depart along with him.
In an earlier bankruptcy blog, ATA Business Bankruptcy Plan Blown To Bits, I explained that, unlike a personal bankruptcy, in a business bankruptcy, debts are not discharged by the court. Compromises may be negotiated with creditors, but, once that’s done, remaining debt is paid by liquidating the assets of the company. The bankruptcy court then administers the process of paying off the creditors.
In 2004, Mikelsons borrowed almost $700,000 from the company. Then, when he resigned a year later, he agreed to make quarterly payments on the debt. Since he’d negotiated a non-compete agreement with ATA and was going to receive quarterly payments from the company under that agreement, Mikelsons also agreed to turn that non-compete compensation back to the company as part of repaying his debt. The final payment from Mikelsons to ATA (actually via the bankruptcy trustee) is due in January of next year.
This story is just one of tens of thousands of stories from bankruptcy court. It is a good example of what I emphasize is the bankruptcy process. Bankruptcy, whether personal or business, is not an “event”, but a system that continues to work to restore stability to a financial situation, to oversee the sale of assets to repay debt, to oversee periodic payment plans, and, to the extent possible, keep the entire business system working as smoothly as possible. My job as a bankruptcy legal professional is to steer clients through the various stages of that process so that they can emerge ready to rebuild their financial lives.