Bankruptcy Reform

Bankruptcy reform is obviously a very prickly issue. Large corporations, small business and even families would like to see the blanket of bankruptcy to be much larger, with the notable change of exempting more of their personal assets.

Investors, or course would like to see more of their investment protected. They don’t getting blindsided when one of their investees declares bankruptcy, and if they do they want as much (if not all) of their money back.

Therefore, the investing industry has requested the following bankruptcy reforms to be enacted.

  • Filing delaines should be accelerated. Especially for small businesses. This means that creditors would be required to either quickly approve or deny continued operations. Right bow, the whole process can take up to six months and for many investors that is too long.
  • Creditors should be given the option of electing their own governors of firms operating under chapter 11. This idea is not completely popular. It is kind of like leaving a child in candy store. The argument for it, and against total control by a government trustee is that, a trustee is just doing his job. A trustee hired by the company will want to maximize profits, and have all of the connections and resources at their disposal to do this.
  • Some then argue that the power of the trustee be increased and that he be given more flexibility when try to liquidate assets and return these profits to investors.
  • Secured debts should be allowed to be used to collect the collateral from which they were borrowed. Otherwise it’s like going back to a pawnshop where you hocked your guitar and getting a blender in return. You can play stairway to heaven on a blender.
  • Market values should always be consulted when there is a disagreement over the value of a product.
  • All schedules should be hastened. Drawing these proceedings out in court is painful for everyone and it costs the taxpayer a lot of money.

There are no surefire ways to make bankruptcy reform easier, there will always be a tug of war between creditors and debtors. The key is finding the right balance and trying not to make a bad situation worse.

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