Well that is what they say, but the truth is somewhere in between.  As we find ourselves in new, strange financial waters with the executive branch of the U.S. government effectively firing the CEO of General Motors and pressuring board replacements one has to consider what is bankruptcy?

Bankruptcy is an "option" when an organization becomes technically insolvent.  I say technically because firms have successfully entered bankruptcy protection with millions in cash still on board.  Control of the organization passes from management to a judge.  Both the creditors and the firm hire financial advisors and lawyers.  While bankruptcy protects and freezes all payments to creditors it also gives companies the right to reject any current contract, with judicial approval that they feel is onerous to their business model.  Bankruptcy is not a death sentence for a business unless the business model is severely flawed, many firms emerge from bankruptcy years later with modified business models.  Bankruptcy is very expensive with advisors and lawyers generally getting paid from 5% to 10% of the organizations value, as an example, a $100 million dollar business can in its insolvency generate between $5 million and $10 million in revenue for financial advisors and lawyers to administrate the "venue".  Bankruptcy is a process that is designed to let organizations liquidate orderly, or restructure with new business models.  What we have seen over the past 6 months is the U.S. government running a defacto bankruptcy court for the banking system and now, the auto industry.  If oil prices has not plummeted, airlines would have been included as well.  Should bankruptcy processes be allowed to function within a capitalistic system as they were intended or are we in a new age of activist government intervention?  What do you think? 

Artcile by Dana Wiklund for