Bankruptcy and Bailouts
June 24, 2009 by Charles Moster
Filed under Bankruptcy
As a bankruptcy attorney and former lawyer for the Feds, I feel compelled to point out the drawbacks of the current bailout to GM and other entities which might seek Chapter 11 protection. The bankruptcy laws afford no special protection to taxpayers in a bailout situation. As such, the massive outlay advanced by the American people may never get fully repaid in a Chapter 11 proceeding which is highly problematic.
The purpose of Chapter 11 is to allow the honest debtor to reorganize its debts and thus restructure obligations to creditors. The process necessarily involves the reduction of creditor claims so that available assets can be more equitably distributed. In most contexts that makes perfect sense.
However, the Bankruptcy Code recognizes special protection for discrete groups like the American taxpayer when a situation so warrants.
- read the full post from Charles Moster of Moster & Wynne: “Bankruptcy & Bailouts - Need for Reform“
