In Unjust Debts, legal scholar and professor Melissa Jacoby explains how bankruptcy differs if you are a person, a small business, or a big business. As you might expect, big business wins. The extent, however, shocked even me, and in my past work, I’ve covered a lot of companies that went Chapter 11 and knew that bankruptcy didn’t mean the end of a company.

For individuals, bankruptcy is complicated. Not only does it destroy your credit but the courts don’t deal kindly with those who file. They may often be able to pay more for debt relief than they can afford (oh, the irony). There are also racial and educational disparities. It’s better than nothing, but it’s a port of last resort.

For companies, especially large companies, it’s a different matter. Companies that file for bankruptcy get far more protection than people. Chapter 11 basically gives a company time to get itself together. In theory, this is to benefit not just the company but its employees and customers. In practice, it rarely works out that way.

Jacoby talks about city bankruptcies like what happened in Detroit, and once again, it’s the little guy, particularly those who had lawsuits or claims with the city, who gets the short end of the stick. She also goes into great detail about how companies like Johnson & Johnson have used bankruptcy filings not just to limit losses from large class action lawsuits but to curtail the amount of money future claimants could receive. Bankruptcy is more than protection from creditors; it’s a way to restrict future liability and that makes it a very powerful tool.

This isn’t an easy read, but it’s an important one if you are curious about the role of bankruptcy in our culture and interested in becoming a more socially aware investor.

We never talk about how credit card companies, and student loan companies, and the medical system, actually thrive on us not being able to pay things back. We now have "debt consolidation" companies that can be just as predatory. I was really glad to see that this book was being published. We need to talk about this.
Bankruptcy is absolutely a way for the rich to get away with things, while normal citizens are stuck. A few of the chapters depressed me but it is information I need to have if i want to make any changes in our society.
Why do the pharma companies get to kill people and then not pay their debts but I am stuck with student loans for life?
Thanks for the Appendix. I needed it because I am not educated enough to understand all of this. I love it!
Thank you so much!