With ex-CEO Dov Charney in the courtroom, the current CEO of Top 40 supplier American Apparel (asi/35297) took the stand at a bankruptcy hearing yesterday to explain why the company should not be handed back over to its founder. Yesterday’s hearing in Delaware bankruptcy court was the beginning of multi-day proceedings to determine if a judge will approve either American Apparel’s restructuring plan or Charney’s investor-backed takeover bid.

Testifying yesterday in support of her company’s plan, current CEO Paula Schneider said American Apparel’s board rejected Charney’s $300 million bid because the company’s lenders opposed the offer and believed it would add too much debt, according to Bloomberg Business. She said Charney’s offer could embroil the company in additional lawsuits from lenders, Reuters reported, and require over $130 million to pay off loans and run the company during the additional time it would take for the offer to be approved. “The affiliation with Dov Charney was not a problem," testified Schneider, according to Reuters, in reference to why the company’s board turned down the ex-CEO’s offer.

Charney was originally scheduled to testify yesterday, but his testimony was pushed back to today. He declined to comment yesterday after Schneider’s testimony.

Judge Brendan Shannon must determine if American Apparel’s reorganization plan, which would include handing control of the company to Monarch Alternative Capital and other lenders, is in the company’s best interest. If not, Charney and his investor team of Hagan Capital Group and Silver Creek Capital Partners could convince the judge that their offer is a superior proposition for the company.

In a recent operating report, the company reported it lost $14.5 million in November. The Los Angeles Times reported that net sales for the month were $22.3 million, a decline from $29.2 million in October.