It’s been a rough week for the more than 1,500 truck drivers and employees at New Century Transportation Inc. The company announced via a letter on Monday, June 9 that it was abruptly shutting down and filing for Chapter 7 bankruptcy protection.
Throughout the week Land Line has heard from former employees and truck drivers who admit that their biggest fear, besides not having a job, was not getting paid as promised on Friday, June 13.
However, it appears New Century has kept its word as several drivers and employees reported to Land Line that they had received their paychecks on Friday, but did not receive their vacation pay or safety bonuses.
Many drivers made personal sacrifices to return the equipment to the company’s headquarters in Westampton, N.J., even though they were told they would be on their own to find transportation home. Some office personnel stayed on throughout the week, answering phones from panicked drivers and customers after rumors of the company’s demise proved true.
Late Wednesday, June 11, New Century and its affiliated companies filed a voluntary Chapter 7 bankruptcy petition in federal court in New Jersey.
In its filing, New Century, as well as Northwind Logistics LLC and Western Freightways LLC, estimates the number of creditors as ranging from 200 to 999, and lists its assets and liabilities as each ranging from just over $10 million to $50 million.
According to court documents, the company estimates that “after any exempt property is excluded and administrative expenses paid, there will be no funds available for distribution to unsecured creditors.”
Catherine E. Youngman has been appointed to serve as the Chapter 7 trustee for all three companies in U.S. Bankruptcy Court in Trenton, N.J.
Joseph H. Lemkin is the chair of the bankruptcy group at Parker Ibrahim and Berg LLC, which has offices in New Jersey and New York. Lemkin told Land Line that what is unique in New Century’s Chapter 7 filing is that the trustee has asked the court to allow the company to continue to operate for a limited period.
“When a company files a Chapter 7 liquidation proceeding, a trustee is appointed to marshal the company’s assets and distribute the proceeds of the assets pro-rata based upon a priority scheme set forth in the Bankruptcy Code,” Lemkin told Land Line on Friday, June 13. “In a liquidation case such as New Century’s – unlike a Chapter 11 bankruptcy, which contemplates reorganization – a trustee is not authorized to continue the debtor’s operations.”
However, Lemkin said in limited circumstances under Section 721 of the U.S. Bankruptcy Code, the court “may authorize the trustee to operate the business of the debtor for a limited period, if operation is in the best interest of the estate and consistent with the orderly liquidation of the estate.”
He said the section cited by the trustee in the New Century filing is used where preservation of the debtor entity “as a going concern may increase the prospect of recovery to creditors, rather than an immediate cessation of operations and piecemeal liquidation that may result in a limited distribution to creditors.”
“In this case, the trustee believes limited continued operations will maximize the value of New Century’s assets and increase the potential distribution to creditors,” Lemkin said.
According to the court filing, as of the petition date, trucks were still out on the road delivering freight for customers, which included hazardous materials and controlled substances such as prescription drugs and perishable items.
“Completion of these deliveries would increase account receivables and could reduce potential exposure to the estate for deliveries not completed, and issues arising from hazardous materials,” Lemkin said.
See related stories:
New Century files Chapter 7 bankruptcy petition days after abrupt shutdown
Skeleton crew at New Century works to help drivers, calm customers' fears
Rumors of New Century's demise prove true, leaving truckers in the lurch
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