Case in point:
In 2008, General Motors (GM) filed a Chapter 11 bankruptcy. The company did this so GM could remain viable going forward. When they filed, GM was relieved of approximately 122 billion dollars of unsecured debt.
In other words, the company legally discharged 122 billion dollars of what could be described as the equivalent of credit card debt. They moved on, became more viable, and today, in 2012, GM is the largest manufacturer in the world. Many jobs were saved by this action as well as whole industries that relied on GM for business.
The rights afforded to GM under the Bankruptcy Code are not just for GM. Those rights apply to E V E R Y B O D Y. As long as you have a tax ID number or social security number and you’re a breathing human being or legal entity, be it a company, SPE, or the like, you are considered a Debtor under the Bankruptcy Code and you’re afforded similar rights.
What’s the genesis of the Bankruptcy Code? The Founding Fathers of this country decided to leave “debtors’ prison” behind them in England when they founded this country so no one would find themselves in jail because of debt. United States Presidents Abraham Lincoln and Ulysses S. Grant exercised their rights and filed bankruptcy when they found themselves in financial hardship.
I was therefore shocked and dismayed when I started my law practice to discover the plight of my clients and that they weren’t taking advantage of these rights. I encountered individuals who were hemorrhaging their 401(k)s, their pensions, their 403(b)s and IRAs, and all of their retirement accounts to pay back unsecured debt. They were doing so even though they had the legal right to pay nothing. Consider the fact that the Bankruptcy Code generally protects up to 100 percent of the money in retirement accounts without any limits or caps.
I don’t believe in anyone paying when they’re way over their heads and have the legal right to walk away. In my mind, there’s no choice between paying the rent and purchasing medication, food, utilities, or other necessities and paying on credit cards. In these cases, people need to file bankruptcy, get a fresh financial start, and move on with their lives, as provided under the Bankruptcy Code.
To learn more about this financial strategy read Living Debt Free!