ResCap bankruptcy gets support from Treasury

Ally Financial unit, Residential Capital, which is majority-owned by the federal government, has gotten approval from the Treasury to reorganize under Chapter 11 bankruptcy protection.

A ResCap bankruptcy has been highly anticipated and today the Treasury said they would support bankruptcy under certain conditions and if that was the ailing company's only alternative for debt relief.

ResCap is one of the country’s largest subprime lenders, and has been a drag on Ally Bank. The Wall Street Journal reported that a pre-packaged bankruptcy can result in the sale of ResCap’s assets to Forrest Investment Group.

According to Bloomberg, a ResCap bankruptcy reorganization would allow taxpayers to recoup more of the $17 million bailout money the mortgage and auto loan company received in the fall of 2009.

By meeting with a bankruptcy attorney and developing a debt relief plan in a timely manner an ailing business will be able to return to a better financial state. Waiting until interest on debts pile-up can prolong a bankruptcy proceeding.

Bankruptcy lawyers can analyze an individual’s or company’s financials and determine if a Chapter 13 or Chapter 7 debt relief plan can end their troubles and satisfy creditors.

Each bankruptcy structure differs in the way creditors are paid back. Under Chapter 11, a company is allowed to continue operations while paying down their debts, in many cases some of their liabilities can be reduced.

Bankruptcy attorneys recommend Chapter 13 and Chapter 7 to individuals who can longer pay off their creditors. Chapter 7 requires that assets be liquidate with all the proceeds going to creditors, while Chapter 13 allows for a structured repayment plan that must be fulfilled ina specific time period.