Bankruptcy in Indiana Readers Learn from Stockton Scandal

June 11, 2013 10:35 pm Published by

Despite some myths, most bankruptcies are very private affairs. The rare exceptions tend to involve well-known local business leaders or political figures. These unfortunate cases serve as a reminder of how business failures can sink even the most experienced of entrepreneurs. Sometimes the first episode of a story is a Chapter 7 business bankruptcy. Then, sometimes, a personal bankruptcy filing will follow, especially if the business was involved in lawsuits and ends up losing in one or more of those lawsuits.

Unfortunately, the Stockton, California Catholic diocese is considering filing bankruptcy, and is has very much to do with a lawsuit. Even more unfortunately, the matter is hardly very private.  Unlike the situation with almost all clients who turn to the my colleagues and myself for Indiana bankruptcy help, the sex abuse lawsuits causing the diocese to consider filing bankruptcy are very large and very public.

“We have paid out over $15 million in settlements, judgments, and legal affairs, so we have depleted, virtually depleted our reserves,” said Bishop Blaire.

As a bankruptcy attorney in Indiana, over the past 26 years I’ve seen many business successes and as many business failures. In an earlier Bankruptcy in Indiana article, “Small Business Owners Have Lots Of Big Company In Bankruptcy”, I cited a study by the Ewing Marion Kaufman Foundation For Entrepreneurship that showed many businesses fail because of reversals in their marketplace or in their industry. But the truth is, thousands and thousands of bankruptcies are filed for a different reason altogether – lawsuits.

Now as my colleague the Columbus bankruptcy lawyer often points out, filing for bankruptcy can actually stop a lawsuit, because the Automatic Stay stops most legal proceedings and collection actions against the business owner. Depending on the facts of the case (if you have a good chance of winning the lawsuit, then bankruptcy may not be the best option), the business owner and his Indiana bankruptcy attorney can decide on the best course of action. Sometimes it happens that a lawsuit forces a company to file bankruptcy because that company has no good legal defense against the suing parties, and/or not enough financial resources to continue the legal defense effort. On the other hand, I've filed many bankruptcies for business owners who had an absolutely winning case, but who chose to file bankruptcy to avoid the onerous cost of defending a frivolous lawsuit.

Needless to say, the Stockton diocese situation is more than a scandal – it’s a terrible tragedy. "It is our hope that this settlement will help the victims continue to find healing for the suffering he endured," was the statement by diocese leaders. "We have tried to find resolutions to these cases that will provide some measure of solace for victims.  

Bankruptcy is a legal process, and in its way, it’s meant to provide some measure of solace for both creditors and debtors.  Bankruptcy, however, deals with only the financial aspects of any situation. When I’m offering Indiana bankruptcy services, there are typically no victims, only debtors and creditors and a court system striving to treat each as fairly and equally as possible.

 

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This post was written by Mark Zuckerberg

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