BP's Bankruptcy

author: Dustin Wetton

Ever since the April 20, 2010 blasts that sent gallons of oil leaking into the Gulf, the BP company has been heavily under legal fire. Lawsuits for damages, ranging from environmental to loss of life, have really hurt the company. Yet according to a recent article at BreakingLegalNews, a lot more harm will have to come BP’s way for any possible consideration of bankruptcy to be discussed. According to the article, BP still has many resources and options available to itself before it has to consider bankruptcy. While it has suffered in the stock market, has many lawsuits pending against it, has been on the downside of almost every judgment declared by the court, and has many creditors that are worried about being paid, BP still does not have to file bankruptcy. Thus, for our blog’s purpose, even when a company such as BP, under the worst environmental circumstance in many years, can believe that it does not have to file for bankruptcy, the question is when should you? When should a company or an individual decide to file for bankruptcy?

Luckily for individuals, the answer is easier than for businesses. For a chapter 7 bankruptcy to be filed, an individual must pass what is known as a “means-test.” Under the current BAPCA standards, an individual can only file for chapter 7 bankruptcy if they can prove to the federal court that their means cannot afford their end. If they however show that they can afford their bills and if they just rearranged their finances, they could get out of debt, than the court will not allow for a bankruptcy.

Thus, for individuals, a good method to see when you should file bankruptcy is to do a similar test. If you take all the debts you owe and compare then to all the income you make, ask yourself if it is possible to get out of debt without filing bankruptcy. If you know that you cannot make your monthly living payments, your car payments, your student loans, your child support, and your credit card bills without sacrificing your food or clothing, than you probably should consider bankruptcy. But, if you are sitting in similar shoes to that of BP, and you have a lot of debt, but you also have a lot of options and can refocus your finances, than you probably should consider doing that first before you file for bankruptcy.

Therefore, to answer my own question, when should you file bankruptcy…you should file it when it is rational to do so. That is, the decision to file for bankruptcy should be responsible, logical, and make the best sense. That goes for both individuals and for businesses. If you are considering bankruptcy, reflect on your financial situation and decide if it’s the best decision for you and your family.

If you have any questions or comments on the blog, email us at: blog@lauruslaw.com.