New Bankruptcy Laws
on Sep 22 in Flotsum & Jetsam by Don SilverI visited Gary, my favorite corporate bankruptcy lawyer in Center City Philadelphia today.
Gary had become a friend during a certain time in my life when bankruptcy looked quite likely, if not appealing. I was the CEO of a family business, which, after seventy years, found itself in a very slow and unprofitable period. While soaking us for exorbitant fees, Mellon Bank of Pittsburgh told us they were calling our line of credit, which would have caused us to default on supplier agreements, which would have rendered us unable to make and ship product and ultimately meet payroll.
When our other advisors counseled acceding to the bank’s wishes, Gary recommended calling the bank’s bluff, which we did. In scenes as harrowing as those described by Tom Wolfe in A Man in Full, we authorized Gary to tell our bank as politely as we could to perform a sexual act upon itself, and went looking for a strategic buyer for our firm.
Today, after exchanging pleasantries, and asking about each other’s families, I asked Gary what he thought of the new bankruptcy laws that the Republican Congress had passed and the Bush Administration had heralded as an end to allowing people to get away with cheating creditors. I was curious whether Gary thought this would have any effect on his clients. Here’s what he told me.
These new, stricter laws are aimed at limiting personal bankruptcies, keeping ordinary people on the hook for way longer and much more than previously. Like anti-monopoly protection, bankruptcy laws are one of very few ways our society has modified pure capitalism so it doesn’t destroy poor people in the name of efficient markets. Most personal bankruptcies, Gary explained, maybe upwards of eighty percent, are due to catastrophic medical disasters or loss of employment, not somebody trying to beat their creditors. The new laws are just punitive, he told me, with a grimace.
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