Miami-Based Star Transportation Files for Chapter 11 Bankruptcy Amid Industry Struggles

Miami, FL — Star Transportation PA Inc., along with its five affiliated companies, has filed for Chapter 11 bankruptcy protection, marking a significant development in the trucking industry. The filing, made last Friday in the U.S. Bankruptcy Court for the Southern District of Florida, includes Star Transportation of Miami and its subsidiaries: Finance Solutions LLC, MDL Business Group LLC, Star Transportation A Inc., Star Truck Service Inc., and US Express Line LLC.

The filing affects over 400 truck drivers and more than 230 power units, as reported by the Federal Motor Carrier Safety Administration’s (FMCSA) SAFER database.

Safety and Compliance Records

In the 24-month period leading up to the bankruptcy filing, Star Transportation’s trucks underwent 507 inspections, with 103 trucks being placed out of service — a rate of 20%, slightly better than the national average of 22.3%. Meanwhile, driver inspections totaled 1,018, with only 13 drivers being placed out of service, reflecting a 1.3% rate, well below the national average of 6.7%. However, the company reported involvement in three fatal crashes, five injury accidents, and 24 incidents requiring tow-aways over the same period.

Financial Woes and Assets

Court documents reveal that Star Transportation’s assets are valued at under $1 million, while liabilities are estimated between $10 million and $50 million. The petition also notes fewer than 100 creditors, with plans to allocate funds to unsecured creditors during the reorganization process.

Victor Khramov, who serves as president and sole shareholder of all six entities, signed the 23-page bankruptcy petition. The companies are represented by Miami-based bankruptcy attorney Joseph A. Pack.

Court Approves Joint Administration and Factoring Agreement

On Sunday, U.S. Bankruptcy Judge Corali Lopez-Castro approved an emergency motion for joint administration of the bankruptcy cases. This consolidation allows Star Transportation and its affiliates to streamline their Chapter 11 proceedings. Additionally, the court granted interim approval for a post-petition factoring agreement with RTS Financial Services, based in Overland Park, Kansas.

The company’s court filings indicate that without this financial lifeline, Star Transportation would lack the necessary cash flow to continue operations or to proceed with its reorganization plans.

Industry Challenges and Financial Strains

In a statement to the court, Khramov cited the unprecedented challenges facing the trucking industry in 2024 as a driving factor behind the bankruptcy. Rising fuel prices, increased insurance premiums, and escalating maintenance costs have all contributed to the company’s financial distress. Khramov noted that repair expenses have surged, in some cases tripling compared to just a few years ago.

The company currently operates a fleet of 219 trucks and 235 trailers, a mix of both owned and leased equipment. According to court filings, Star Transportation’s decision to file for bankruptcy was precipitated by a lender’s move to repossess 47 of its financed trucks, further straining its financial stability.

Upcoming Deadlines and Legal Challenges

Star Transportation has until November 12 to submit its list of the top 20 largest unsecured creditors and its corporate ownership statement. The full schedules of assets, liabilities, and a statement of financial affairs (SOFA) are due by November 15.

The bankruptcy filing follows closely on the heels of a federal lawsuit brought by two former workers, who allege that the company misclassified them as independent contractors rather than employees, in violation of the Fair Labor Standards Act (FLSA). This lawsuit could potentially complicate the company’s efforts to restructure.

Looking Forward

The future remains uncertain for Star Transportation and its affiliates as they navigate the Chapter 11 process. The company hopes that a successful reorganization will allow it to survive the current industry downturn and stabilize its financial footing. However, with growing liabilities and legal challenges, it remains to be seen whether Star Transportation can turn the corner in these turbulent times.

Stay tuned to Freight Relocators for updates as this story develops.