In most parts of the developed world, bankruptcy has a sense of finality to it, yet less so in the United States than perhaps anywhere else.
“America leads the world in many fields, but perhaps most commandingly in bankruptcy,” the editors of The Economist commented in 2005.1
Granted, bankruptcy in America still carries the stigma and shame it should. We've already commented on how failure shouldn't be taken too lightly or brushed off too glibly. Filing for bankruptcy in the American tradition is not a badge of honor, but neither is it the end. It is associated with second chances, with new beginnings, and with an opportunity to redeem past mistakes.
At its best, American industry is resilient, adaptive, and innovative. Its bankruptcy laws tend to capture that spirit. “Chapter 11 in the United States is the darling of the international business world,” University of Michigan law professor John Pottow told a journalist a few years ago. “If you are a company or even a rich person, you can go into the bankruptcy system and confront your failures, and you will not be punished.”2
Indeed, General Motors, American Airlines, and Eastman Kodak were able to use bankruptcy in recent years for new beginnings, as did entrepreneurs, such as Henry Ford (twice), Milton Hershey, and Walt Disney, at stages of their now-legendary empire building.
F. Scott Fitzgerald famously quipped, “There are no second acts in American ...