March/April 2003

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Anyone who has casually read the business press over the last few months cannot help but be aware of the high-profile bankruptcies currently pending. Out of the numerous restatements of financial statements have arisen the Enron and WorldCom Chapter 11 filings. The already cost-bloated airline industry was tipped over the edge by the events of 9/11, with US Airways leading the way, recently to be followed by the country's second-largest airline, United (much to the chagrin of we Chicagoans with many frequent flier miles). These series of filings follow upon those by companies that have sought the refuge of the Bankruptcy Code to cope with unquantified contingent liabilities arising out of seemingly endless litigation, such as Johns Manville, A.H. Robins, and Dow Corning.

At the same time, followers of the federal legislative process will have noticed the ongoing tussle between the consumer credit-card lobby, trying to toughen up the laws pertaining to personal bankruptcy, and the consumer advocate lobby, trying to maintain the status quo. In a strange twist, even by Washington standards, during the most recently completed session of Congress a bill which would have placed tighter restrictions on personal bankruptcy, particularly for high-income filers, failed to garner the support of socially conservative Republicans. The sticking point? Inclusion of a provision intended to appease wavering liberals that would have prohibited those responsible for bombing abortion clinics from avoiding damage payments by declaring bankruptcy.

What the average reader may not realize is that the prevalence of bankruptcy in the United States today, both for individuals and for businesses, is unparalleled in any other society in the world, spiraling ...