Families who file for Chapter 7 Bankruptcy feel the stress just as acutely as big businesses whose executives must stand before a judge and put the company's poor economic decisions or financial setbacks on display.
If the past decade and a half has taught the American public anything, it's that individuals and big business may each experience financial vulnerability and the inevitability of bankruptcy. The Great Recession was a great equalizer in bringing down big companies just as often as it brought down financially strapped homeowners with bankruptcy, liquidation, and foreclosures.
One of the reasons why some companies decide to file for bankruptcy is the threat of legal action tied poor financial decisions. Other companies simply can't survive the economic downturn and need to consult with attorneys to begin a liquidation of assets.
Sometimes bankruptcy results in the death of a company, while others survive the process and emerge on the other side with renewed strength and vision. Here's a selection of some of the biggest bankruptcies of the Great Recession, and what happened after these companies went to bankruptcy court.
1. Lehman Brothers ($613 billion in debt)
Called the "seminal event" that catapulted the Great Recession into full swing, the collapse of securities firm Lehman Brothers shocked America and was just the start of a slew of huge bankruptcies that wiped out savings, investments, and the net worth of millions of Americans.
One of the primary reasons that Lehman Brothers filed for bankruptcy was the housing bubble burst and the subprime lending crisis. Incredibly, the company actually survived the largest bankruptcy in history, but it was forever changed and still faces the prospect of a total liquidation.
2. Washington Mutual ($307 billion in assets)
In 2008, at the time of its collapse, Washington Mutual stood as the largest bank failure in U.S. history. The bankruptcy wiped out shareholders, creditors, and became a symbol of the Great Recession's hold over the banking industry.
The Federal Deposit Insurance Corporation (FDIC), the government body responsible for insuring bank deposits, arranged to sell the broken pieces and fragments of "WaMu" to JPMorgan Chase in a messy deal that lost records and created a lot of mayhem for account holders and investors.
Years after the WaMu bankruptcy rocked the nation's economy, the impact of the deal was still being felt as billions of dollars in assets remained in limbo, delaying the final resolution of the bank's fall.
3. General Motors ($50 billion in assistance)
One writer called the bankruptcy of GM the "end of an era," and after several years of losses, it was tough to see a symbol of innovation and American ingenuity require a massive government bailout.
Incredibly, the company emerged intact on the other side of the bankruptcy, but its initial success was criticized by industry experts who declared that another bankruptcy was inevitable.
A recent article in "The New York Times" suggests the vehicle recall scandal rocking the country could revive the bankruptcy debate. Before the recent recall issues, GM expected to see modest earnings gains in 2014.
Learning from the Past
Each of these businesses had great dreams and expectations for the future, but was brought down by a variety of problems that often lead to financial ruin. There are vital lessons to be learned from the massive bankruptcies and the foreclosure crisis of the recession.
Companies, individuals, families, and anyone with financial responsibilities must never turn a blind eye to brewing monetary issues that could have devastating consequences down the road.
The U.S. Small Business Administration (SBA) recommends that business owners don't wait too long before looking at bankruptcy so that if the need to file ever arises, it's not a rushed and hasty process.
Likewise, the Administrative Office of the U.S. Courts advises an investigation of bankruptcy basics as well as a consultation with a financial advisor, accountant, or lawyer before financial stress becomes unbearable.
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