Recently, a lot of high-profile U.S. organizations and companies seem to be surviving imminent financial ruin by filing for bankruptcy. In February, the Boy Scouts of America filed for Chapter 11 after being hit with hundreds of sexual abuse lawsuits. And last fall, Purdue Pharma filed for bankruptcy after being ordered to pay a $12 billion settlement for their role in the opioid epidemic. Other high-profile bankruptcy cases in recent years include the auto industry bailout, as well as the bank bailouts following the subprime mortgage crisis.
While some have pointed to how these industries were “too big to fail” or suggested that bailouts may actually be good for our country, these recent bankruptcy cases also have many people wondering, are U.S. companies taking advantage of bankruptcy law?
The answer to this is complicated.
First and foremost, scholars would tend to agree that there is nothing illegal about taking advantage of bankruptcy law to save your business. However, there is a moral component to consider here too, in that all the aforementioned entities have essentially filed for bankruptcy to escape consequences for their actions.
The Boy Scouts of America is filing for bankruptcy to help save itself following the recent wave of sexual abuse lawsuits. Purdie Pharma may be attempting to save itself in the wake of the decision regarding their role in the opioid crisis. And of course, the banks and auto companies were only able to survive because the government decided they were too important to live without—despite the harm they caused to American workers leading up to the 2008 recession.
Not every organization has these advantages. For one thing, it is more difficult for nonprofits to avoid responsibility by filing for bankruptcy. If anything, the Boy Scouts of America is the exception to the rule. For instance, the Catholic Church and USA Gymnastics were not able to escape financial consequences for their role in recent sexual abuse scandals. This is why the U.S. legal system allows for mass torts—so that individual victims may receive compensation when a larger company or organization is found to be at fault.
However, this is also why bankruptcy law is fundamentally important—to protect the individual. Both nonprofits and corporations should be held responsible for their role in causing mass pain and suffering. However, bankruptcy law also protects individuals who suffer because of the consequences of organizations. The average American does not want to file for bankruptcy, after all; they do it because they have been left with no other choice.
At the Law Office of Russell S. Hershkowitz, L.L.C., our experienced bankruptcy attorney is here to represent individuals in their time of greatest need. We provide aggressive counsel to help stop foreclosures, prevent lawsuits and garnishments, halt repossessions and evictions, and facilitate debt forgiveness. If you are facing bankruptcy, remember that there is hope. Take advantage of the law as it was intended to be used, and contact the Law Office of Russell S. Hershkowitz, L.L.C. to schedule a free consultation today.