Bankruptcy is death, in every sense of the word

Business truly does flow into nearly every facet of life, indeed into every hallowed hall of higher education, and I'm not just talking about corporation sponsorship of academic programs.

While attending a two-day seminar this past week on bankruptcy basics at the National Judicial College at the University of Nevada, Reno I learned several life skills that will carry into my professional career.

• Mock bankruptcy trials are indeed just as boring as the real deal, for those of you who have never experienced such disgrace as bankruptcy court, it's just as nap-inducting as watching the stock quotes on CNN whiz by on the bottom of the screen.

• Bankruptcy lawyers talk in code. Since it has only been translated by a few select individuals you will be overwhelmed with unpleasant feelings similar to those felt if watching "The Da Vinci Code" backward. Or forward for that matter.

• Don't get into debt and put yourself into a position where you can't pay for it. Ever. You won't understand how to file for bankruptcy. See above comment on Lawyers.

Bankruptcy is fun-less. Absent of any enjoyment. I've been taught that it should be viewed as death. It's either the person's finances, or the small business that has died. Almost everything freezes, called an "automatic stay" to protect the debtor and his or her property from creditor actions. The debtor has a right to start over again. The point of the bankruptcy process is to eliminate the chaos after the death of a company or entity. Bankruptcy is about failure.

In the case of a Chapter 11 bankruptcy, the company shareholders, or owners, will not get anything after the funeral. Jim Waggoner, a lawyer on the panel said he'd only seen two cases where the shareholders came out with equity on the other end. In bankruptcy, the corporation belongs to its creditors, which often comes as a surprise to small business owners who had invested everything they had into a popsicle stand.

It's often the small business owners that come before Judge Eileen Hollowell, who presides over bankruptcy court in Tucson, Ariz. I'm sure she must have been exaggerating when she said 95 percent of small businesses have insufficient capital for start-up. But then again, a lot of small businesses don't make it past the first year.

Waggoner, who often acted as a mouthpiece for the creditors he represents, said businesses should always have enough equity to start-up and should never be without cash flow.

Small business owners know best how difficult that can be in a world where corporations are moving in to small-town markets.

Pure capitalism has no limits and allows excesses of greed, said Gary Hengstler, director of the National Center for Courts and Media. It's through the courts that our consciences are shocked, he said, so that we have to react and exact justice where needed.

But those who attended the seminar heard another message from the panel. Within financial systems, law isn't an agent of change.

So what is? One attendee decried the loss of pensioners income when airlines or automotive companies restructure.

If pensions are a priority in the national conscience, then Legislators should make it so in the bankruptcy law. Pensioners are given the same priority as other unsecured creditors, who are on the bottom of the list when pay-out time comes.

One skeptic in the audience remarked that big business has better lobbyists than pensioners. Congress hasn't given preference to pension holders. But it could be that the national conscience has realized that pensions are a thing of the past, and our future is the 401(k).

• Contact reporter Becky Bosshart at bbosshart@nevadaappeal.com or 881-1212.