It's Interesting to See How the Bankruptcy Stigma Does Not Apply to ...

Recently, we've seen many household names filing bankruptcy as a way to restructure their debt. What's interesting is how Americans perceive a business filing bankruptcy versus an individual filing for bankruptcy. When an individual enters into bankruptcy, there is a stigma that follows them as if they were a failure. Many question the person's integrity and their lifestyle that caused the bankruptcy filing. On the other side of the coin, when a big corporation files for bankruptcy, it's just good business. Not many really care whether it's wiping out small businesses that are vendors to that corporation or wiping out the pension for long-term employees. The bottom line is, people don't want to see that name fail at whatever cost.

Businesses use a bankruptcy attorney as a form of strong-arming unions into changing labor agreements and getting vendors to reduce their debt amounts.

Just the threat of filing bankruptcy and having a bankruptcy attorney contact the creditors is usually enough. If the creditors won't budge, bankruptcy is put on the table and if necessary it is filed. Most businesses file Chapter 11 bankruptcy to restructure their debt and lobby the court to let them out of contracts that they feel are detrimental to recovery of the company. If the company cannot restructure, filing Chapter 7 bankruptcy might be necessary to liquidate all the assets and pay the creditors. Many times creditors would rather push for the Chapter 7 bankruptcy if the company has large amounts of assets to s ell, like real estate. In this case, they are more likely to be paid for their debts then in restructuring.

There have been some interesting bankruptcy filings over the recent years like Kmart. In the case of Kmart, the shareholders got wiped out by the bankruptcy court, while the assets were liquidated for a small amount. After all the dust cleared, the group that bought up the assets profited billions of dollars. This is an example of how corporate bankruptcy wiped out the small guy and benefited the investment groups.

When all this goes on, still not many people seem to look down on the corporation filing bankruptcy. It's either; they don't understand it or they just don't care. I guess it makes better gossip to talk about your brother-in-law or your neighbor's bankruptcy filing and how they don't know how to manage their money. It seems like a double standard to me and as more Americans are filing for bankruptcy these days, hopefully more will understand to the plight of those having financial difficulties.

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