St. Louis isn’t that far from Indianapolis. When I read the news story about the Patriot Coal Company there, I realized the bankruptcy ripple effect happening there isn’t very far from what’s happening to clients of the Zuckerberg bankruptcy law offices here.
As a debt consolidation lawyer, I’m constantly reminded how the fates of businesses and that of the individual people who own them – or of those who are employed by them – are intertwined. Northeastern professor Platt was right on: “When a person files bankruptcy, they reduce their spending on goods and services sold by companies. Similarly, when a firm files for bankruptcy, some employees lose their jobs and their income”. In fact, the professor adds, a 10% increase in corporate bankruptcies results in a 3.4% increase in the personal bankruptcy rate.
In its bankruptcy petition, the Patriot Coal Corporation is proposing to cut labor costs by $150,000,000 a year, ending pension contributions, changing its healthcare benefits, and lowering pay rates. The United Mine Workers of American Union is saying it would be forced to call a strike if these things happened. “No contract, no work,” the Union’s lawyer warned.
As an Indiana lawyer for bankruptcy, I know all too well what a gigantic ripple effect is in store for both the company and its employees, as well as for their suppliers and customers and the local economy.
On the one hand, the company is saying that, without the cuts, it will be forced to liquidate. If that happened, 1,700 Patriot employees would lose their jobs. Thinking about those workers, I realize many of them would end up needing help to stop foreclosure on their homes. Some might even need payday loan debt help or student loan debt help. (Job loss, as every good bankruptcy attorney in Indiana well knows, is one of the three leading causes of personal bankruptcy.)
- Bankruptcy law, by the way, (this is true of Indiana bankruptcy law and federal bankruptcy law) allows companies to make cuts in labor contracts, if they can show such a step is crucial to the company’s survival.
- The ripple effect would then move throughout the local economy, as laid-off workers would have less money to spend.
Having offered Indiana bankruptcy help to some 60,000 individuals and small businesses, I can see both sides of the dilemma in the Patriot Coal situation. The company doesn’t begrudge the workers or retirees their wages or benefits, as their attorney points out – it simply can’t afford those benefits!
Categorised in: Bankruptcy Indiana
This post was written by Mark Zuckerberg