All these situations have contributed significantly to the discontentment within the trucking business in the previous year. In that regard, the need for transportation has decreased, causing a reduction in freight prices, coupled with factors of inflation, which have led to an increase in operating expenses. Further the problem has been exacerbated, by the fact that the interest rates have been on the rise, thus increasing the possible expenditure of the companies in the industry. Many transport and logistics companies have had to restructure or go for bankruptcy because of the extreme measures brought by the above-stated issues.
Sunset Logistics, an Irvine, Texas-based company is one of many companies hurt by these adverse market conditions. The motion was submitted on October 3 in the U.S. Bankruptcy Court for the Northern District of Texas where the firm is located to declare bankruptcy under Chapter 7, primarily blaming low freight rates, a struggling economy, and high operating costs. This is because they were not able to operate anymore and instead sought to sell their business establishment. In addition, the company was facing a lawsuit for the year 2024 filed against it by its factoring firm Porter Capital in the month of April. According to Porter Capital, which provided factoring services to Sunset, the latter breached a resource factoring agreement due and as a result owed $5 million plus other costs.
In addition, the organization Boateng Logistics also entered into financial turmoil, as a result of which it announced Chapter 7 bankruptcy on February 22. To solve financial issues, Boateng was forced to stop business operations and liquidate assets.
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Whereas other firms have opted for liquidation in straight cases, some such as Star Transportation PA have gone for Chapter 11 filing with the intention of restructuring their business and operating. Star Transportation, a firm that is incorporated in Miami, Florida, filed for Chapter 11 protection on 1st November. The company and its five affiliated companies were nearly facing the loss of 47 trucks following a lender’s order of the trucks’ repossession. The firm had assets of the value ranging from $1 million to $10 million while the debt was estimated to be between $10 million and $50 million. The trucking company explained that the reason for financial difficulties was the rise of costs, the number of insurance claims, and the very high price of servicing and fixing the fleet. Some of these repair bills had increased threefold from the prior year, as company president Victor Khramov said.
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Star Transportation was on the brink of filing bankruptcy as it was already embroiled in legal issues. Two ex-employees sued alleging that the company misclassified them as independent contractors instead of employment status, which was a breach of Fair Labor Standards Act. Nevertheless, following the filing of the said bankruptcy, all litigation activities are stayed due to the automatic stay provision.
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Star Transportation has its own equipment of 219 trucks and trailers which has some leased equipment. In order to operate during the Chapter 11 case, Star was granted interim approval for a debtor-in-possession factoring agreement with RTS Financial Services. This agreement will allow Star to fund its ongoing operations since it did not have sufficient unencumbered cash or assets to continue operating without it.
The financial troubles of these companies affect the trucking and logistics industries, which remain very problematic, as such companies are restructuring or liquidating their assets, and many of them are doing the latter.
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