The Sharks are Circling

Sharks are voracious predators. They are bottom feeders that eat almost anything, and they have the reputation of tenaciously ripping their prey apart with large teeth that are not only bone hard but razor sharp.

Scientists who have studied the behavior of sharks, say sharks circle their prey in order to size up the image they are observing. Since sharks have to keep water moving over their gills in order to breath, moving around an object in the water is the only way they can evaluate their prey. 

The Wall Street Journal recently posted a news article written by Eric Morath. Seems the American Bankruptcy Institute (ABI) did a survey on their membership, consisting of lawyers, judges, and other bankruptcy officials. The survey reviewed whether or not junk debt buyers, the bottom feeders of the financial world, should be allowed to participate equally in the bankruptcy liquidation process after buying debt from the creditors of a failed company. 

According to the article, junk debt buyers often buy debt in troubled companies for pennies on the dollar from vendors, bondholders and other creditors. The successful buyers then become vocal advocates in the bankruptcy case, pushing for larger recoveries for their level of debt or to take ownership in the company. 

The speculative activity can have a negative impact on the bankruptcy process, but there are certain groups who disagree. In the ABI poll, 63% of the membership polled strongly disagreed with the statement, “a party that bought claims for pennies on the dollar should receive less in bankruptcy than the original claimants would have received.” Another 11% of the members who responded disagreed only somewhat with the statement and 21% of the respondents showed some level of support. 

I was surprised by the response of those in the the bankruptcy industry. If the junk debt buyers never had a financial interest in the company prior to the bankruptcy, are there ethical issues surrounding such a strong active role by this group during the bankruptcy process? Are the junk debt buyers the sharks of the financial world? 

The bankruptcy system still works, despite the predators, and hiring a bankruptcy lawyer can help you understand the complexity of bankruptcy laws. If you need relief from the stress of debt and you live in or around the metropolitan area of Baltimore, Maryland, contact us at .We will help you find a bankruptcy attorney in your area who will answer your bankruptcy questions.

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