Bankruptcy's Thriving Business

November 18, 1983

Report Outline
Business Bankruptcies
Personal Bankruptcies
Bankruptcy Courts in Limbo
Prospects for the Future
Special Focus

Business Bankruptcies

Going Out of Business: Its Changing Image

Bankruptcy — once considered the lot of the financially irresponsible or unfortunate — no longer seems to carry the stigma of personal dishonor it has in the past. Both business and personal bankruptcies are on the rise, and while filing for bankruptcy is still generally an act of last resort, it has become an effective business strategy for some corporations and individuals. Witness Continental Airlines, which, after filing for bankruptcy last September, announced it was no longer honoring collective bargaining agreements with the company's unions. Shortly thereafter, equally solvent Eastern Airlines threatened to follow Continental's example until it reached a compromise with some of its employees over labor concessions. A year before, Manville Corp., the giant asbestos producer, filed for bankruptcy in order to avoid paying millions of dollars in damages to former employees stricken with asbestosis and related diseases.

While such corporate maneuvers have aroused considerable controversy in recent months, the number of personal bankruptcies far exceeds business filings. Many observers attribute the rise in personal bankruptcies to such economic developments as inflation and recurrent recessions, which, together with the increasing availability of credit, have left many consumers stretched so thin that one unexpected expense is all it takes to drive them to bankruptcy court. The banking and credit industries, however, blame the trend on recent changes in bankruptcy law that allow individuals to go bankrupt without necessarily forfeiting their personal property. Charging that bankruptcy has' become an easy way out of paying bills, the banking lobby is pressing for changes in the law.

Complicating these issues is the question of who has judicial authority over bankruptcy cases. The Supreme Court in 1982 struck down the bankruptcy court structure set up by Congress in 1978. The court stayed its ruling for six months, but when Congress failed to amend the law within that period, the justices refused to extend the stay. Since then, the bankruptcy courts have operated under an interim rule promulgated by the U.S. Judicial Conference, the policy-making arm of the federal judiciary. As the bankruptcy caseload mounts, Congress continues to grapple with the issue.

ISSUE TRACKER for Related Reports
Banking
Sep. 26, 2014  Digital Currency
Oct. 05, 2012  Euro Crisis
Jan. 20, 2012  Financial Misconduct
Jan. 13, 2012  ‘Occupy’ Movement
Oct. 24, 2008  Financial Bailout Updated
Sep. 01, 2000  The Federal Reserve
Jun. 22, 1990  S&L Bailout: Assessing the Impact
Nov. 04, 1988  Behind the S&L Crisis
Apr. 26, 1985  New Era in Banking
Nov. 18, 1983  Bankruptcy's Thriving Business
Aug. 07, 1981  Banking Deregulation
Jul. 19, 1974  Banking Stability
Jul. 17, 1968  Banking Innovations
May 06, 1964  Monetary Policy in Prosperity
May 16, 1940  Revision of the Securities Acts
Feb. 27, 1937  Expansion of Branch Banking
Sep. 03, 1935  The Decline of Commercial Banking
Dec. 11, 1934  Proposals for a Government-Owned Central Bank
Sep. 12, 1934  Bank Reserves and Credit Inflation
Nov. 27, 1933  Bank Credit in Depression and Recovery
Aug. 12, 1933  Closed Banks and Banking Reform
Apr. 04, 1933  Unified Control of Banking
Apr. 09, 1932  The Glass Banking Bill
Mar. 24, 1932  The Guaranty of Bank Deposits
Apr. 17, 1930  The International Bank and the Gold Standard
Feb. 08, 1930  Branch Banking and Chain Banking
Apr. 29, 1929  Mergers of Banking Institutions
Oct. 28, 1927  The Federal Reserve Rate Controversy
May 21, 1927  Labor Banking and Finance Since 1920
Jan. 31, 1924  The Northwestern Bank Failures and the Attack on Treasury Savings Certificates
Dec. 01, 1923  Why State Banks Do Not Join the Federal Reserve System, the Effect on the System and the Issues Involved
Nov. 23, 1923  Branch Bank Controversy
BROWSE RELATED TOPICS:
Bankruptcy