Using Bankruptcy As A Negotiating Tool?

As a Consumer Bankruptcy Attorney in Florida, I speak with creditor attorneys from all over the country about bankruptcy and debtors. In the process of negotiating with creditors, it seems that debtors actually tell the creditors that they will file bankruptcy if they have no other alternative. The creditors almost always look at this statement as a feeble attempt by debtors who want to avoid paying their debts. But, the statement is usually true. Take the case of Sharper Image for example.
The creditors may be right sometimes, but retailer Sharper Image is now singing that very same tune. I heard a story on the radio about an upcoming court hearing where Sharper Image may threaten bankruptcy. It seems that the retailer was selling Ionic Breeze machines for about $300 a pop, and they sold about 3 million of these machines. The allegations are that the machines did not live up to the claims made by the company. If the company has to pay $900 million dollars in damages, it will probably end up in bankruptcy court.

On the other hand, Sharper Image may be just playing the bankruptcy trump card to entice the plaintiff’s into a smaller settlement. The question in my mind, and one that should be in the minds of all creditors is: When an individual or a corporation threatens bankruptcy, do you really want to take that risk?

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