Bankruptcy becomes exit of choice

Some big companies have already gone bankrupt. The Tribune Company is the most recent. But, one of the trend's earliest victims was Lehman.

At the economy goes deeper into Hell with each passing month, bankruptcy attorneys will become the richest lawyers in America.

According to MarketWatch, "A sour economy and tight credit market clearly are just the right ingredients to bring about a wave of bankruptcies." There is no shame in it. Airlines have been doing it for decades.

Chapter 11 is actually a nifty way to stiff debt holders and employees. If a company can find an investor who wants to gamble they can get most of a bankrupt firm's assets in court, a debtor-in-possession, a judge can void loans and employment contracts in the name of keeping a troubled firm alive.

All of that may be good for the operations who seek court protection, but the trend would do further damage to the economy. Many of the firms who financed companies that are in trouble are banks. More losses for them will lead to more write-downs. And, that leads to more shareholder dilution and more government aid. On the employment side, cutting big numbers of people increases joblessness. That, in turn, ratchets down consumer spending and pushes up government costs to support those without work.

Otherwise, Chapter 11 is a great idea for companies in peril.

Douglas A. McIntyre is an editor at 24/7 Wall St.