To a financier or an IRS agent, the word "forgiveness" has a technical meaning.  When a debt you owe is "forgiven", you don't need to repay that loan (and you may owe income pay tax on that benefit).  In the bankruptcy process, certain debts may be "discharged", which means the person filing bankruptcy is excused from repayment of all or part of those debts.  Working as a bankruptcy attorney in Indiana for more than twenty years. I deal with the discharging of debts every day.  But, what I find so interesting and important about it all is this: While there may be a lot of discharging of debts going on around bankruptcy courts, what I'd really like to see a lot more of is forgiveness going on around bankruptcy clients and their friends, families, and associates. 

As you might imagine, by the time my clients come to see me about filing a bankruptcy case for themselves and possibly for their small business, they are under considerable strain. They haven't been sleeping very well, so they're not feeling very healthy or energetic. They are not in a very good state of mind to be making the kind of crucial decisions I'll be discussing with them.  In many cases, people cast blame.  There's a lot of blame put on spouses, on parents, on children, on partners.  Even worse, many bankruptcy filers expend energy blaming themselves for their situation.  None of this blaming helps the situation.  Trust me on this - I've counseled with tens of thousands of debtors from all walks of life - blaming always hurts, and it almost never helps.

Dr. Phil published Ten Life Laws.  Life Law #9 is, "There Is Power In Forgiveness".
Dr. Phil explains that hate, anger, and resentment are destructive, eating away at the heart and soul of the person who carries them."  He goes on to say, "Forgiveness is not about another person who has transgressed against you.  It's about you."

Recently, the Oprah Show featured the Forgiveness Project, a new charitable organization dedicated to the idea that "by listening to the voices of people who have experienced reconciliation and renewal, it is possible to see alternatives to endless cycles of violence, crime, and injustice in the world".  When it comes to the bankruptcy process, as I've often stressed in this bankruptcy blog, it's the "Now what?" part of the process that really matters, the part where people rebuild their financial lives.  By forgiving others - the government, the weather, the war, the partner, the spouse, and, most of all, forgiving themselves, people emerge from bankruptcy stronger than ever, eager to write "the rest of the story." Holding on to blame and resentment keeps people in the same old story forever.

Bringing you up to date on the ATA bankruptcy hearing, I emphasized how bankruptcy is a process with certain stages.  By now you know that, as a small business bankruptcy attorney, I need to stay on top of news about businesses in various stages of that process, so as to offer the most up-to-date legal and business advice to my Indiana bankruptcy clients. 

Three business stories from just the past week or two illustrate what I mean by "bankruptcy process".  The first story is about a 175-year old company called American LaFrance, or ALF, which is one of the oldest fire and emergency service vehicle companies in the U.S.. (One observation to make here  is that even very old and solid companies sometimes need to make use of the bankruptcy system.)  The bankruptcy court judge entered an order confirming ALF's Chapter 11 Plan of Reorganization, which means the company can emerge from bankruptcy.  ALF was "in bankruptcy" for less than 17 weeks. In an earlier bankruptcy blog I explained that the bankruptcy law is designed to treat all parties fairly. In the ALF case, 90% of the creditors supported its plan.

In Virginia, Movie Gallery, Inc. successfully emerged from Chapter 11 bankruptcy protection after restructuring its debt.  Movie Gallery, started with 97 stores thirteen years ago, is now the second largest North American video rental company in the country.  "Through this restructuring," explained the company chairman, "we have effectively addressed our financial and operational challenges."  In practical terms, all of Movie Gallery's existing common stock and bonds were cancelled, and under the bankruptcy plan, new common stock and bonds are being issued to unsecured creditors of the company.  Again, bankruptcy is a process.

Meanwhile, In Delaware bankruptcy court, Hilex Poly Company, the world's largest plastic bag company, announced an agreement with its creditors under a "voluntary" Chapter 11 reorganization plan. This means the company can continue to operate as usual while the debt restructuring is in process.  In this case, all obligations to customers could be fulfilled, and suppliers could be paid in full.  The mechanism used in this case was special financing from GE Capital and Morgan Stanley.  Once more, a process was put into play.

My work as a small business bankruptcy attorney in Indiana is to help each bankruptcy client business owner move through the process as smoothly as possible by adopting strategies that are best for that business, and then carrying through step by step towards a successful fresh business start.
 

A couple of months ago, I wrote about the ATA Airlines bankruptcy that completely shut down the company.  As a small business bankruptcy attorney in Indiana, I have an intense interest in stories about bankruptcy filings by Indiana companies.  As I counsel my small business bankruptcy clients, it's important to draw lessons from other companies that can help my clients avoid mistakes as they rebuild their businesses. Then, too, any time a company closes its doors, my individual bankruptcy clients can be affected.  Some may be laid off because they worked for ATA or perhaps for a company that was a supplier or customer of ATA. The decrease in employment opportunities will have an effect on how quickly my clients can get back on their feet financially following a personal bankruptcy. 

Here's the situation right now with ATA:  At the end of last month, a 341 meeting was held.  This is a special meeting, part of all bankruptcy cases, at which executives of the company are questioned about what caused the company to fail.  In my work as a bankruptcy attorney in Indiana, I am involved in the bankruptcy process.  I use that word "process" by design, because, despite the myths, bankruptcy is not a one-day "event", but an orderly legal process with different stages.  I was personally involved in drafting changes to the Indiana bankruptcy statutes, and I know that the process, while certainly not perfect, is designed to have the courts arrive at as fair a settlement as possible.  That means trying to be fair to both the business owner(s) and the creditors who are owed money.  It also means, in many cases, trying to "save" a business and allow it to continue to operate to retain as many of its workers as possible, and to serve its customers.

The ATA story is an especially sad one, in a way, because the company was founded right here in Indianapolis thirty-five years ago.  Many attempts were made to keep the company going.  These strategies included selling ATA to Georgia-based Global Aero Logistics, and taking on government contracts to transport troops. Then, along with other airlines, ATA was hit with spiking fuel prices.  When it lost its government contracts, the airline simply could not keep going. 

I think one lesson small business owners can learn from ATA is to start working on strategies at the very first signs of trouble.  Sometimes a sale or merger can improve the situation dramatically.  With ATA, it just wasn't enough.  When consumer travel began to fall off, ATA diversified into other areas of business, another good lesson for all small business owners.  Again, with ATA, it just wasn't enough. Adverse market conditions just proved too strong for the company to keep flying.  And that's exactly where the Indiana bankruptcy process comes in as a safety net.

As a bankruptcy attorney in Indiana who always has his ear to the ground and his eye on the post-bankruptcy rebuilding process, I count it a good day if I read news about new businesses moving here, plants opening or expanding, new technology being put to use.  All of us like to hear this kind of good news about Indiana, but, for me, there’s an extra dimension, because I know that business growth means jobs.  Jobs are a key factor for my clients as they re-construct their financial lives after bankruptcy.  A bad day for me brings news of plant closings, business failures, and foreclosures.  All of those things make it tougher for my bankruptcy clients to launch their fresh start.

If you go back to bankruptcy blogs I posted earlier this year, A Good News/Bad News Week In The Nation And In Indiana,  and Some Indiana Good News, With More To Come,  you’ll find a mixed bag of news about business, housing, and employment around the Hoosier state.  Here are some of the highlights of just the past couple of weeks:

Genesis Manufacturing in Fortville, a plastic welding firm, is expanding its facility after landing a new contract to make sterile covers for surgery instruments.  Genesis, by the way, creates the helmet pads for U.S. troops to protect against head injuries from land mines.  In Lebanon, U.S. Cold Storage is adding a 400,000 warehouse in the Lebanon Business Park, and plans for a rail spur from the nearby CSX Railroad line are underfoot. U.S. Cold Storage would be the first tenant in a 250-acre plot Duke wants to develop.  Meanwhile, in Noblesville, life sciences company Helmer, Inc. has moved into a new 72,000 square foot headquarters, adding 20 more employees and seeking more.

On the negative side, I was sad to read of the closing of the Frank E. Irish contracting company, whose president reported that tight credit and skyrocketing supply costs forced him to close, laying off 180 workers. 

It seems as if, every week, there’s been a pull and tug, with bad news about Indiana business on the one hand, good news on the other. Here’s what I’ve concluded about all this:  My individual bankruptcy clients will find themselves emerging from the legal filing process into a work climate that offers them many new opportunities.  But they must be prepared to keep up their education and job skills, and they must be flexible. Small business owners emerging from the bankruptcy process can also find many opportunities for profit, but they, too, will need to keep up with changing markets and a changing workplace.  In my work as an Indiana bankruptcy lawyer, I’ve put the emphasis on the “end of the story”.  I try to do all I can so that each of my clients emerges from the bankruptcy process saying, “Today is the first day of the rest of my life”.

Besides catching up with my spouse and kids, I try to use some part of each weekend to catch up on my reading.  A couple of weekends ago, I found food for thought on the editorial page of Indianapolis Business Journal.  As a bankruptcy attorney in Indiana, I try my hardest to stay on top of economic news around the world and especially developments here in our state (as you know if you’ve been a follower of this bankruptcy blog).  Knowing all I can about what’s going on helps me give very useful, individualized legal and financial advice to all my bankruptcy clients. 

Every so often in my reading, I come across a tidbit of wisdom that isn’t so much news, as it is a new way of viewing the news.  That kind of reading helps me as well, because it opens my mind to new approaches to current problems and different ways to view the future.  The IBJ editorial was one of those thought-provoking, new-way-to-see-it, kind of articles.  It was titled “Pricy fuel isn’t all bad”.

The editorial talked about all the ways in which Hoosiers are “getting with the program”, meaning how they are accepting the unpleasant realities of rising fuel costs, but then striking out to find new opportunities to solve the problem. For example, a $100 million venture capital fund is being started to invest in “clean” technology, meaning alternative energy and “green” (environmentally-friendly) research.  When some technologies turned out to be disappointing, in particular corn and soybean based fuels, Indiana research teams went to work on other solutions.  An aviation fuel is being made from plant byproducts.  Fuels are being made from animal waste.  A plant is opening to turn wind into electricity, and Indianapolis Power and Light recently struck a deal to buy wind power.  A plant in Greenwood is being completed to make auto parts that improve fuel efficiency in cars.  These businesses, plus many others, are creating new jobs in Indiana.

As I processed all this information, the thought that came to my mind was that, when facing challenges, we can choose to channel our thoughts in one of three ways. We can keep avoiding the issue, running from the facts.  Second, we can cry and moan to everyone about how terrible things are, throw blame around or, worse, get bogged down in self-blame.  Last – and here’s why I found the article inspiring – we can roll up our sleeves and start focusing on the “OK, so now what?”  Working every day with folks facing bankruptcy, I know that their choices are almost always these same three.  Running away from looming financial issues, whether business or personal or both, doesn’t help solve anybody’s problems.  Blaming problems on the economy, on employment problems, on politicians, on partners, or on oneself – none of this helps.  Whether it is Chapter 11 or Chapter 13 bankruptcy, whether it’s personal bankruptcy or small business bankruptcy, the purpose is offering a fresh start.  The real focus needs to be on the future, and on the solution rather than the problems.  In other words: “OK, so now what?”  

In an earlier bankruptcy blog, I shared some insights gained from reading a fascinating article in the Harvard Business Review on the subject of neuroscience.  As an Indiana bankruptcy attorney, I see evidence every day of my working life of the different ways in which people, and in particular small business owners, react to stress.

The author of the article, Dr. John Medina, is a developmental molecular biologist who works as a private consultant to business. ( Besides my being a very curious fellow, I'm on constant lookout for information that can help me serve my Indiana bankruptcy and financial counseling clients.)

I learned some very interesting things from "The Science of Thinking Smarter" article.  For instance, our brains are built to handle acute stress.  Any of us can probably have several truly stressful times, even during the course of one day, and handle those just fine.  But, as Medina points out, suffering stress over a period of months (and he specifically refers to bad marriages, hectic workplaces, and money problems as three protracted stressors) is something our brains just are not made to withstand.  Prolonged stress, according to Medina, causes the body to produce a set of hormones that disconnect the webbings between brain cells.  Overstressed people (and I can certainly vouch for this from seeing tens of thousands of people in my Indiana bankruptcy offices during the past twenty-plus years!) don't do math well, don't process language efficiently, and have poorer memories.

Think about this for a moment - math , language, and memory skills are exactly the skills needed to excel in business.  Plus, the three stressors Medina mentions - bad marriages, hectic workplaces, and money problems - are very often the precise three that lead to bankruptcy.  Dr. Medina admits that some people's genetic makeup seems to make them more resilient to stress.  However, stress in general is bad business for both bodily health and for the health of any small business.

As I've reminded you before - I'm no brain scientist.  I can relate, though, to the enormous relief expressed to me over and over again by clients once they have faced up to their financial realities and moved forward with filing bankruptcy.  Whew!  Now they can stop looking over their shoulders and start to look ahead.  It almost seems that the process of avoiding a decision is a lot more stressful than the decision itself!

In this bankruptcy blog I’ve been writing a lot about small business owners.  As a consumer bankruptcy specialist in the state of Indiana, I have learned over my many years of practice how intertwined business finances and personal finances are for almost all small businesses.  While, depending upon the business structure, it is possible for a business to file bankruptcy without the owner filing a personal bankruptcy, I still find that, nine out of ten, both the family and the business feel the pain when debts pile up.

That’s why I was so interested in a story I read in the  Indianapolis Star a couple of weeks ago featuring the Timms, who were just honored as Indiana’s Small Business Persons of the Year.  I know that many of you who read my Indiana bankruptcy blog are going through difficult financial times right now, and I thought this tale of survival against all odds might prove as inspiring to you as it was to me.

Almost five years ago, Cottage Garden, a sentimental gift making business, was on the brink of failure.  Owners Mark and Angela Timms had maxed-out credit cards and a line of credit they thought they could never repay.  Everyone was discouraged, from the owners to the Cottage Garden employees.  As if things weren’t bad enough, a tornado completely destroyed the Timms’ home.  It seemed as if the next step was a Going Out Of Business Sale!

But that’s not at all what happened.  The Timms let their employees know that everyone’s help was needed to save the business, and, using teamwork, save the business is exactly what they did.  Today Cottage Garden is the largest producer of sentimental music boxes in North America, with more than 600,000 boxes sold just last year!.

Can every business situation be saved with a combination of a positive attitude and teamwork?  Of course not!  Interesting thing, though - when business owners stop hiding from their difficulties and sit down with me to consider all the options (filing bankruptcy is just one of several options we discuss), that’s when the power of teamwork really kicks in. Suddenly the focus is not on what has happened, or what should have happened, but on what can happen from that point forward.    And, often, that focus on future action is the most startling and yet the most encouraging turn-around of all!

By now, unfortunately, we’re all used to reading and listening to news about bankruptcy across the U.S.. From major corporations down to the little folk, there’s no scarcity of stories about financial failure.  Of course, as both a small business bankruptcy attorney and a consumer bankruptcy specialist in Indiana, I see the up close and personal version of such bankruptcy stories every working day.

As sad as many of these stories are, I couldn’t help chuckling at the following “riddle” I received in an email passed along to me by a friend:

What company has a little more than 600 employees and has the following statistics:

 19  have been accused of writing bad checks.
117 have directly or indirectly been involved in the bankruptcies of at least two businesses. 
 71  cannot get a credit card due to bad credit ratings.
 21  are defendants in lawsuits.
  8  have been arrested for shoplifting.

(I wasn’t really prepared for this answer!)  It’s the 615-member British House of Commons, “the same group that cranks out hundreds of new laws each year to keep the rest of us in line,” adds the writer.

Now, I must say here that, though I have dealt with literally tens of thousands of bankruptcy filings over the past quarter century, almost never have I found the rest of the statistics listed in the email about the House of Commons members to be true of my clients:
  7  have been arrested for fraud.
 29  have been accused of spouse abuse.
   3  have done time for assault.
   4  have been arrested on drug-related charges.
 84  have been arrested for drunk driving in the past year.

Fact is, most of my Indiana bankruptcy clients, both the individuals filing Chapter 7 or Chapter 13 bankruptcy, or the business owners filing Chapter 11 or Chapter 13 cases, have simply been overwhelmed by forces beyond their control.  The safety net provided by Indiana bankruptcy law gives these people a chance at a fresh financial start.  

As you know by now, I'm an avid reader of all news that has to do with money matters.  My work as an Indiana consumer bankruptcy specialist for both small businesses and individuals makes it important for me to know as much as I can about what's going on in the world of lending and borrowing.  That way, I am better prepared to give the best and most current advice to my bankruptcy clients.  In my blog a couple of months ago, I wrote about a relatively new phenomenon, which is people paying their everyday bills, including grocery and utility bills, using credit cards. (You can now charge even a Big Mac at MacDonald's!)

Now at first glance, with all the people and the companies you read about that are filing bankruptcy because they couldn't pay their bills, you'd think credit card companies (and Visa is the largest) would be suffering because of having to write down so much uncollectible debt.  You might have been amazed to learn that just a little more than a month ago, VISA actually offered the largest IPO (initial public offering of stock) in our country's history!  And not only did the company choose to list their stock on the New York Stock Exchange during one of the worst times in the stock market that we've seen in a long while, the offering was unbelievably successful, raising almost $18 billion from investors!  The initial share price was $44.  (Remember that number, as I'll come back to it at the end of this blog.)

The thing many folks don't know about Visa is that it's not actually a credit lender at all - it's the world's largest credit card processor.  Big difference! Visa carries no consumer debt on its books.  The company makes all its money from fees for processing transactions.  And so, consumers using credit cards for everyday bills, (a bad sign of the times), is actually great news for Visa, because it has more transactions to process!

And what is Visa doing with all these billions of dollars it raised in the IPO?  It's buying back its own stock that it had sold to banks such as JPMorgan Chase, Bank of America, Citigroup, National City, and Wells Fargo.  Those companies do have lots of consumer credit on their books, and a hefty percentage of that debt is not getting paid back to them by consumers.  All those banks can really use the money.  And Visa?  In one month, their stock went from $44 to approximately $65!  For the mathematically challenged among us (OK, I confess!  I had to use a calculator.), that's 48% gain in one month.  Must be nice...

The ATA Airlines bankruptcy was a recent headline grabber (in fact, I wrote about it in an earlier blog), but another big name company, Sharper Image, had filed for Chapter 11 bankruptcy back in February.  It's interesting to compare the two situations. As a business bankruptcy attorney in Indiana these many year, I try to understand the factors that lead companies to struggle financially and finally to avail themselves of the safety net the bankruptcy courts provide.

Both ATA and Sharper Image had suffered through years of declining sales and bottom line losses.  Some particular factors that played a strong role in both companies'  difficulties were rising fuel prices, competition, and tightening credit (stricter credit requirements made it difficult for ATA to obtain money for needed updates and repairs to planes, and difficult for Sharper Image to open new stores and build inventory). 

In each case, however, there was one big "straw that broke the camel's back".  In the case of ATA, as I've written about earlier, it was losing the FedEx contract to transport military troops and supplies on ATA planes.  This had been the one profit center for the airline, and, without that source of revenue, the company was unable to go on.   Sharper Image's "straw" was different.  A series of class action lawsuits having to do with claims that their Ionic Breeze air purifiers did not produce promised results for consumers turned out to be highly expensive in terms of legal costs and negative publicity.  

In my bankruptcy law practice, I deal mostly with privately-held, small businesses, advising them on their financial strategies and helping them deal with debt issues. Since my clients' companies are not publicly held, their earnings (and their losses) do not appear in shareholders' reports.  By the time the owners of small businesses are talking to me, their companies have sustained losses for years.  Often they have faced some of the very same type of credit crunch and competitive challenges that ATA and Sharper Image encountered.  But, unlike the giants, these small businesses suffer in silence - and, often in secrecy - with the owners hoping for a miraculous turnaround.

One of the messages I hope this bankruptcy blog will bring to business owners is that it will be easier in the long run if they face up to difficulties at the first sign of trouble, creating a  strategy that allows for the possibility of filing bankrupcy, but at the very same time taking all possible steps to prevent debt problems from overwhelming the business.  

So, your small business is starting to show signs of financial stress.  You've followed the advice in my earlier bankruptcy blog and kept the taxes and basic bills paid, cutting back on expenses wherever possible, all the while negotiating more lenient payment terms with suppliers and creditors.

As a small business bankruptcy attorney in Columbus, Bloomington, Anderson, and Indianapolis, I can tell you about two other steps you'll want to take to protect your business interests, and one thing not to worry about.

One item to put on your to do list is locking in insurance.  If you end up filing bankruptcy, you may have trouble finding an insurance carrier willing to issue, or to renew, coverage.  So, right now, get insurance in place that extends at least a year.  Then, as long as you keep the premiums current, the insurance can't be cancelled.

Second to-do: make sure you have money in a checking account with a bank other than the one to whom your business owes a lot of money.  Many business loans have terms allowing the lender bank to go into the checking account you have with them without notice to get payment.

One thing not to lose sleep over is having the utilities shut off.  If you've paid the bills, just because you file bankruptcy, the utility companies cannot shut off services, although they might require a deposit.

I think you can see why I advise thinking about all these details way in advance of being at the point of a forced bankruptcy.  The more preparation you can do up front, the less aggravation later on.  And, as I've said before, times are hard, but with some preparation and expert professional advice, you can weather the storms.

I continually stress in this bankruptcy blog how important it is for debtors to seek professional help at the first signs of a financial downslide.  In my Indiana bankruptcy law offices, I see thousands of individuals and couples each year, but I also find myself working with hundreds of small businesses.  One of the sad aspects of my meetings is that too often, these meetings are taking place months, or even years, after the trouble started.  And what that means is that certain remedies that might have been available no longer are.

You know that old saying, "A stitch in time saves nine!"?  Well, that is so true for businesses experiencing financial problems.  Of course, not every business is advised to file bankruptcy, but if  bankruptcy is the final choice, a whole lot of pain and trouble could be avoided by starting to prepare early on.

Here's my first piece of advice to business owners:  As soon as you realize the money coming in isn't enough to cover all the expenses, prioritize.  Pay the taxes!  Pay the utilities and other basic bills, all the while negotiating with suppliers and creditors for extra time to pay them.  (I've written before about factoring - you might want to see your accounts receivable to raise immediate cash.) The main thing is - don't just let things go unpaid - talk to those suppliers and creditors, so they can see you making a good faith effort to keep up.

Second, if you apply for a new loan, tell the truth, for goodness sake!  Fully disclose all your debts.  Third, don't try "hiding" any of your assets, or giving them away, or - whatever.  F-r-a-u-d is a dirty word - don't give anyone reason to use it in connection with you or your business.

Keep in mind that if you file bankruptcy, all payments you've made to creditors during the year preceding the filing will be looked at to be sure no one creditor gets preference over the others.  There are some legal details involved with handling secured and unsecured credit, and this is an area I spend a lot of time working on with my clients (again, not a do-it-yourself project).

There are other "stitches" you can use to save time, costs, and legal hassles, but what I want to emphasize here is the "in time" part of the saying.  Let's face it - times are hard now for small business owners and for families, so don't waste time beating up on yourself.  You haven't come this far as a business person by being unwilling to make the tough decisions.  So, what I say to you is, "Start stitching!"

At the beginning of the month, ATA Airlines closed forever, two years after a Chapter 11 Reorganization.  In several earlier blogs, I explained that bankruptcy is meant to buy time for businesses to work out a plan and, hopefully, get back on their feet or at least complete an orderly liquidation of assets.  That's what ATA was trying to do.  The airline was engaged in talks with five potential buyers of their company, all the while keeping their 29 jets running.

Then, something unexpected went very wrong.  FedEx, who administers charter transport of supplies and of troops for the Pentagon, using ATA jets, decided to take that business away from ATA.  Without that source of revenue from the military charters, ATA was unable to continue working its plan to emerge out of bankruptcy.

As a bankruptcy attorney in Indiana, I'm dealing with both personal and small business bankruptcies every day.  In this bankruptcy blog, I've explained that the primary difference between personal and business bankruptcies is that with a personal bankruptcy, some debts can be discharged by the court.  In a business bankruptcy, debts are not discharged.  While some compromises may be negotiated with creditors, assets must be liquidated to pay the debts.

What is happening now in the ATA situation is that the company is petitioning the federal bankruptcy courts to let it sell off the assets it owns and get out of leases it has on its airplanes.  Meanwhile, all flights have been cancelled and all employees let go. 

This is a sad example showing that sometimes the bankruptcy safety net isn't enough to save all companies, or, in this case, all airlines.

Not two months ago, I wrote a blog called "It's Not Good When Gold Glitters", explaining that, at times when investors are worried about stocks, gold prices tend to rise.  When investors worry about inflation (meaning their dollars are losing buying power), gold prices rise.  Gold is considered a "safe haven", I explained, in times of uncertainty.  At the time I was writing that article, gold prices were at $890 a Troy ounce.

Then, just a couple of weeks ago, the price of gold literally went through the roof, hitting a $1000 per ounce record high.  Just as I had explained, this was the result of investors' fear of a weakening U.S. dollar and of coming inflation.

Now, here we are just a couple of weeks after the big upward swing in gold, and the picture has changed.  With stocks having bounced up quite a bit and the price of oil having come down a bit,  we're getting some bad news about gold (remember, that's good news for stocks and the economy!).  Gold prices took a dive back to the $900-an-ounce neighborhood.

A number of factors are all working at the same time to cause these price swings.  The Federal Reserve lowered interest rates, and, contrary to expectations, the dollar gained in value against the yen, stock prices rose, and the commodity prices of wheat, sugar, corn, copper, and platinum all fell.

As a bankruptcy attorney in Indiana, I understand how all these price movements around the world come home to roost, affecting my family and friends as well as all my Indiana bankruptcy clients.  That's the reason I try to stay current on economic news.   While, as I've often repeated, I'm no economics guru, I deal with financial matters day in and day out, counseling individual debtors and small business owners struggling to survive and to make sense of all these ups and downs. 

A humorist once remarked about our weather here, saying "If you don't like the weather in Indiana, don't worry.  Just wait a day or two and it will change!"  Sometimes I think the same thing can be said of the economic climate….

As far back as eight to ten years ago, when rising bankruptcy rates began being the stuff of headlines, researchers debated whether the cause of all those bankruptcies was spendthrift consumerism. Some commentators were saying that small business bankruptcies were becoming fewer in number, especially under the new revised bankruptcy laws, while the number of personal bankruptcies was rising. 

A more in-depth look at the situation with small businesses shows how misleading this perception can be.  As a bankruptcy attorney in Indiana, I work with many small business owners in addition to working with individuals and families.  What I am finding bears out the truth of a study published in the California Law Review called "The Myth of the Disappearing Business Bankruptcy."  The article brings out the fact that the computerized forms used to file bankruptcy often end up "pigeonholing" many debtors as consumers, rather than as self-employed workers and entrepreneurs driven to bankruptcy by business debt.

In my bankruptcy blog I've written many times about the fact that the small business owner's personal and business finances tend to be closely intertwined.  From a legal standpoint, as I've remarked in earlier blogs, if the business is a sole proprietorship rather than a corporation, the business cannot file bankruptcy on its own behalf; the business owner is the one who is filing.  Nonetheless, the core reasons for the bankruptcy have to do with the business challenges, rather than with personal troubles.

That 2005 study revealed that 20% of bankruptcy filings were at least partly business-related.  The study was funded by the non-profit Ewing Marion Kaufman Foundation for Entrepreneurship in the hope that the findings would be considered by lawmakers when revising bankruptcy laws.  For example, current bankruptcy law (as I've written about in earlier blogs) requires credit counseling for debtors to help them with budgeting issues.  The Kaufman Foundation emphasized that many business owners fail because of reversals in their marketplace and in their industry.  Counseling on managing finances is hardly what is needed for such entrepreneurs!

In my years of dealing with business owners all over the state of Indiana, I've found the same thing.  I've seen business owners brought down by forces beyond their control; even when the business itself has been well-managed and well-planned, sometimes it's just bad timing for a particular business. That's where the safety net of bankruptcy comes into play, and that's where my work lies.

Just this month, several fairly large companies filed motions with the bankruptcy court.  While I did not serve as legal counsel for any of the companies I'm going to talk about here, I wanted to share these stories with my blog readers and clients.  Why? These companies are good examples of bankruptcy being used as a valuable tool to enable companies to deal with problems and get their businesses back on track.  As a consumer bankruptcy specialist and small business bankruptcy attorney, one theme I try to stress to everyone is that the bankruptcy process should be thought of as a beginning rather than an ending, because bankruptcy buys precious time for businesses to regroup.

Hancock Fabrics is my first example.  This company filed a motion with the bankruptcy court to allow them to conduct Going-Out-Of-Business sales at three of their stores in Arizona and Illinois.  The purpose here is not to shut down the company, just the opposite!  Hancock wants to continue to operate the business. The bankruptcy process is giving them the opportunity to downsize and to devote their efforts to the most profitable locations.

W.R.Grace, which had previously filed their bankruptcy case and is now working through the rebuilding process, got permission from the bankruptcy court to make the required minimum contributions to their employee retirement fund.  By keeping up with these retirement contributions, the company helps employee morale and productivity while they work to pay their debts and become profitable again.  This is another case in which the bankruptcy process is "buying" crucial time.

In the case of Leiner Health Products, which filed Chapter 11 bankruptcy in Delaware, they do want to sell the business.  But the company still needed time, which they are using to restructure their debt obligations and negotiate in unhurried fashion with potential buyers.

Dura Automotive System, which filed a Reorganization Plan with the bankruptcy court, has yet a different goal in mind.  Dura expects to emerge from its Chapter 11 bankruptcy as a brand new public company.

What I want to bring out here is that bankruptcy is a tool.  That tool is flexible enough to use in different ways, buying the time for business owners to make decisions and chart a course for the future.

A family friend was vacationing in Tampa, Florida a couple of weeks ago and sent me a news item from the Tampa Tribune that she thought I'd find interesting.  An Ohio corporation by the name of Unit 44 Inc., owner of three popular restaurants and clubs in Florida, Margarita Mama's, Banana Joe's, and the Velvet Room, filed a Chapter 11 bankruptcy a month ago.  The business listed assets of under $500,000, with liabilities of $1-10 million.  One of the restaurants, Margarita Mama's, is located on the second floor of a big center named Channelside Bay Plaza, which holds dozens of other businesses, many of them restaurants.  Owners of seven other restaurants in Channelside Bay Plaza all reported rising revenues, and hinted at infighting caused partially by the raucous crowds that Margarita Mama was attracting to what was meant to be a family-oriented shopping center.

As a small business bankruptcy lawyer with offices in four cities in Indiana, I found one detail of this sad story to be especially interesting. The creditors with claims against Unit 44 Inc. included the IRS and Florida Department of Revenue, which is quite typical for businesses that are driven to file bankruptcy.  But the biggest claim against the corporation came from a woman who in the past had been a business partner of the owner' in several different ventures. 

I see this situation so often - people team up in business because they appear to have skills that complement each other, and, of course, to share the risks and the capital costs of owning and operating a business.  While some partnerships last for decades, with the partners' reliance on each other's strengths carrying them through difficult times, very often the stresses of the business turn friends into enemies.  Perhaps one of the partners feels the other isn't pulling his or her weight.  Perhaps family members interfere in the partners' decisions.  Many different factors result in rifts between business partners, and, more often than you might imagine, one partner sues the other.  I then end up hearing the story from the partner being sued, who is seeking my help in dealing with the partner and with all the other creditors.

The Tribune article tells us that the owners of the mall can't be reached, and the business owner said he's "dealing with personal matters".  As a bankruptcy attorney who deals with thousands of different situations each month, I know only too well how business and personal affairs are intertwined for small business owners.  

Here's a question I, as a bankruptcy attorney, hear all the time:  Does filing bankruptcy help avoid foreclosure? And here's the answer:  Yes and no.  Filing a Chapter 7 bankruptcy triggers the "automatic stay" I've been writing about in former blogs.  The stay is sort of a "time out" period for creditors, when no collection efforts can be made, and that includes foreclosing on a home.  And, no, it's not permanent.  What the automatic stay does is buy time, time to take one of the following steps:

First, in the right circumstances, a debtor could "catch up" by bringing his house payments current, perhaps over a five-year period of time.  Obviously, the homeowner needs to prove he or she is now in a position to resume regular payments.  But, even if a Chapter 13 bankruptcy isn't feasible, the bankruptcy automatic stay almost always buys time to strategize and plan, time to consider those four tactics I spoke about in an earlier blog:  mortgage modification, repayment plan, deed in lieu of foreclosure, and short sale.  And, almost always, the stay buys time to stop an immediate sale of the home, keeping the wolves at bay.

Having spent my entire career working on behalf of consumers and small business owners and helping them cope with financial challenges, I always come back to the same message.  I say the same things to everyone I talk to about bankruptcy, whether I'm seeing people in my office in Columbus, Indiana, or whether it's in Anderson, Bloomington, or Indianapolis:  If finances are a serious challenge,
1. Face up to your situation.  2. Get help.  3. Get help early!

Personal and business matters are intertwined for most small business owners, I find.  The owners, and in many cases their family members along with them, live and breathe the business.  As a bankruptcy lawyer in Indianapolis and ithree other Indiana cities, I learn over and over how difficult it is for the owners of small businesses to perceive where business stops and personal life begins.  And, as I in turn reveal to them, if the business is a sole proprietorship, their perception is legal reality - their business is just an extension of them!  If the business is in trouble and needs to be liquidated, it's the owner who files bankruptcy, because the assets and liabilities are those of the owner.

But if the business is held in the form of a corporation, a partnership, or a limited liability company (LLC), that business is a separate legal entity and can file Chapter 7 or Chapter 11 bankruptcy in its own right, without the owner himself or herself filing.

Understand, though, a Chapter 7 business bankruptcy is different from a Chapter 7 bankruptcy filed by an individual.  The bankruptcy court can discharge debts of an individual and give that individual a fresh start.  Businesses don't get their debts discharged.  What the Chapter 7 bankruptcy can provide is an orderly liquidation under the direction of a bankruptcy trustee, at no cost to shareholders.  Creditors are paid to the extent assets are available.  If there are any assets available after that, the money can help pay any individual taxes for which the owners may be personally liable.

A Chapter 13 small business bankruptcy is also different from an individual Chapter 13 bankruptcy.  The purpose here would be to buy time for the owners to sell the business as a going concern, or at least sell the assets without going down to fire sale price levels.  The proceeds could be used to pay salaries or taxes after the creditors are paid.  If the business has substantial assets, a Chapter 13 bankruptcy could be a viable choice.

No matter the legal form of the business, bankruptcy is a very bitter pill for many small business owners, whose pride is so vested in the success of their "baby", to swallow.  But bankruptcy is one area in which it may prove a blessing to have the business act as a legal entity separate from its owners.

Job loss is one of the main causes of bankruptcy in Indiana, as I well know from the personal stories I hear in my bankruptcy law offices in Indiana.  Last week, the Indiana Chamber of Commerce released a report that reinforced what I know about joblessness and bankruptcy.  This report is just statistics now, but it will serve as a blueprint to improve things in the long term in Indiana.  The Chamber study found that more than 931,000 adults in Indiana lack the skills, education, and training to succeed in the work force.  The lack of education and training is especially serious for in Indiana, because our state is cultivating more high-wage, high tech jobs. 

As a bankruptcy attorney in Indiana for many, many years, I am keenly interested in news about our state of Indiana, and especially news that deals with my fields of specialty, consumer and small business debt.  I knew before reading the study that Indiana ranks low in terms of percentage of adults with college education.  The Chamber study confirmed that we are Number 41 compared to other states in the percentage of working-age adults who have at least an associate's degree.  In fact, 12% of working-age adults in Indiana haven't even completed high school!  Needless to say, I see a direct link between these statistics and the number of layoffs that ultimately have people coming to my Indiana bankruptcy law offices for help.

The positive side of this report is the report, strange as that may seem.  Indiana is emerging as a national leader in analyzing adult education and workforce skills.  And while studies don't, in and of themselves, create solutions, the Chamber spokesmen explained that a special committee will be using the information to make recommendations to colleges and to businesses.  It's a long-term proposition, to be sure, but better training and education is going to be the key to improvement of the job situation over the long haul.

The other two main causes of bankruptcy, by the way, are medical costs and divorce, subjects for a different day and different reports.  While our economic leaders are busy addressing the big issues, I'll just keep dealing with individuals and their debts, and small businesses and their debts, one at a time.