Excerpted from the book on mindful business management, Business Black Belt.
New meaning for the term, “Go for broke.”
Bankruptcy may seem like an easy way out of paying your bills, but it can leave you open to losing a lot more—and it’s an opportunity for shrewd takeovers.
Here’s a story that looks at a part of bankruptcy you may have never thought of…
We had a license agreement to pay one of our software developers a royalty for a number of years on a product he developed for us. What we didn’t know was that he had a bad habit of declaring bankruptcy to get out of paying his bills. We found out when an attorney called to inquire about his royalty agreement and to inform me that all payments were to be paid directly to the attorney. He explained that handling bankruptcies weren’t normally his business, but it was his turn to handle one. We joked about it being the equivalent of being assigned to “latrine duty,” but it was his job to clean up this mess. His interest was in settling the accounts and creditors’ claims as soon and as painlessly as possible.
In this case, all of our developer’s assets were assigned to the court in order to pay off the creditors. Unfortunately, his royalty contract was now part of the court’s assets to be handled by this attorney. Our royalty agreement was to pay out over several years, but the attorney needed to settle this case ASAP. To make a long story short, we negotiated $5,000 cash to buy out the royalty contract. This saved us about $25,000 in royalty payments.
You see, he didn’t care what the real value was, he just wanted whatever he could get now to get the paperwork off his desk! Declaring bankruptcy was a big mistake on the developer’s part. I’m not going to dwell on the intricacies of bankruptcy, nor am I going to do any further research on the subject, but it sure looks like you lose a lot of control over your life and assets—beyond the advertised simplicity of getting out of paying your bills.
Business Black Belt Notes
- The bankruptcy trustee can sell your assets for pennies on the dollar just to get your paperwork off his desk.
- Declaring bankruptcy is a conscious act.
- Bankruptcy has a nuclear fallout of about 10 years.
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