On October 11, an insider close to Faraday Future founder Jia Yueting’s creditors revealed that they had received documents indicating that Jia was looking to file for bankruptcy in the United States. It seems Jia will transfer all of his assets to his creditors. Faraday Future (FF) has not yet provided any comment on the situation, and neither have Jia Yueting’s creditors. Should the reports be accurate, Jia Yueting would be required to transfer his assets and income rights to his creditors, while also relinquishing any equity in FF.
Jia Yueting had been reported to be planning a debt repayment plan, together with LeEco Holding Debt Group. Regarding the embattled founder’s application for personal bankruptcy and reorganization in the United States, a person from the LeEco Holding Debt Group said: “Although it is not clear about the specific progress, as far as I know, Mr. Jia Yueting has been planning related debt repayment plans. He is willing to make a huge personal sacrifice, by transferring all personal assets to the creditors in order to fulfill his duty, solve the personal debt problem, and make FF successful.”
In terms of the bankruptcy allegation, the documents obtained by the insider show that Jia will file for Chapter 11 bankruptcy which stipulates asset reorganization rather than Chapter 9 which is liquidation. Chapter 11 is used for individual cases of bankruptcy while Chapter 9 liquidates the remaining parts of an insolvent business.
It is worth noting that in China, there is only an established legal precedent for enterprise bankruptcy, not for individuals. In fact, in July 2019, the National Development and Reform Commission issued a proposal to establish an individual bankruptcy system.