Bankrupt.Me-Not. Book of Problems. Yuriy Yavorsky
The only way to stop the process was to declare bankruptcy…
SECTION 4. PSYCHOLOGICAL TSUNAMI
The Damocles’ sword of bankruptcy is not the loss of wealth per se but, above all, the psychological state that comes over a man who was successful just yesterday, dividing his life into before and after.
PROBLEM 9
Given: an entrepreneur, who is usually well known in the place where he was born, where he grew up and where he has developed his business, cannot simply hide from his recent popularity at the drop of a hat. Just yesterday, he and his company were on billboards, on magazine covers, on employees’ name tags, on the side of cars, on the business cards given to numerous officials, suppliers, and customers, the company was a respected employer… Then suddenly, the soon-to-be bankrupt has to sever his connections with everyone. He locks himself in his luxurious country estate or drives off behind the wheel of an expensive car wherever the road takes him.
Question: what exactly is a psychological tsunami? It sweeps over everyone in equal measure, irrespective of the size of the business. When debts exceed the ability to pay them off, it is only the dishonest and criminally inclined who can remain indifferent. The rest of us realize that once all the resources we have feverishly sought to avert disaster are exhausted, the ‘great water’ will inevitably come to wash it all away.
A ruthless tsunami tears down harbors, seaside villages, and coastal towns, flings ships of all sizes and displacements onto the shore, smashing everything into tiny pieces. Similarly, bankruptcy shreds the usual rhythms and values, veers the meaning of life, and destroys what was dear just yesterday. The psychological tsunami smashes and ruins the lives of all people, however famous they can be, pulverizes tangible and intangible assets of any value, nullifies everything that has been built over years or even decades and provided a living for tens and hundreds of families. Those who are not legally savvy or do not have their in-house legal service feel even worse as they realize that they will not just fail to pay their debts but will be also dragged into the maelstrom of criminal prosecution.
Solution: Unfortunately, as practice shows, no one usually prepares for a potential bankruptcy or even thinks about exploring a civilized mechanism of protection from creditors well in advance of it. Nobody wants to even conceive that this can be possible for a business that was successful just yesterday.
Why do we listen to preflight safety briefings for the umpteenth time: what to do in case of ditching, how to inflate a life jacket and blow the whistle? Why do we practice running to the lifeboats on a cruise so that we know in an emergency which lifeboat is ours, where to find it and how to put on our life vests? And why do we not prepare in advance for a potential bankruptcy? It may be just around the corner, especially after yet another economic crisis.
Every single soon-to-be bankrupt becomes panic-stricken, desperately grasping at straws, as the vortex of impending bankruptcy begins to suck him in.
One should always prepare for bankruptcy by running ‘command-post exercises’ or ‘management games’, just as the military officers run simulations on maps or in a giant sandbox, recreating the terrain of the eventual theatre of operation. It is crucial to keep drilling who will do what when the inevitable bankruptcy first starts gently knocking on the window and then bangs on all the doors. Check the lifeboats and life jackets, make sure the oxygen cylinders are full and the parachute is properly packed. If bankruptcy cannot take you by surprise, there will be no panic, no psychological tsunami.
SECTION 5. CENTRIFUGAL FORCE
To fear is human:
some are afraid of water,
others are afraid of confined spaces,
yet others are afraid of heights,
and some are afraid of a little bit of everything.
PROBLEM 10
Given: there is no one who is not afraid of going bankrupt. But people treat bankruptcy in different ways. Some know how to deal with it in a civilized way, how to manage their assets competently in times of trouble. Others begin panicking, rushing around, blaming everyone else, and feeling sorry for themselves.
As a general rule, the soon-to-be or fresh bankrupt can lose sleep for up to several days. Then depression sets in, sometimes extremely severe and unknown to him who has been so strong and unyielding in any business fight, who used to know no fear in the face of guns and knuckledusters of a gang of robbers or the wrath of corrupt officials and cynical controllers, who has always been ready to go through hell and high water for his business, no matter the weather and time of day.
Question: what happens when he suddenly finds himself facing bankruptcy?
First, an entrepreneur does not want to be called bankrupt; he fears it like the plague, actively fending off the very word ‘bankrupt’ both publicly and privately.
Second, when businessmen start to sense the looming bankruptcy, they begin to spin the centrifuge of problems, seeking advice from everyone and putting in the know even those who are not supposed to be aware of the impending plight.
Solution: do not be confrontational, let alone threatening. Always remember that energy is already being drained, and the next step in business and relationships is total panic. Suppliers stop delivering, banks stop lending, partners refuse to fund joint projects – as a result the cash flow is disrupted, your best employees quit, top managers leave, sometimes even your nearest and dearest shun you.
PROBLEM 11
Given: the maelstrom of problems accelerates as bailiffs arrive and litigation begins. Court orders and restrictions, including temporary arrest of or a ban on property that no longer can be sold or registered, can quickly follow. Foreign travel can be restricted. The centrifugal force of bankruptcy proceedings squeezes out the entrepreneur and deprives him of the right to manage his property and business processes.
Question: what happens next? A group of toxic creditors appear with a financial manager and then a crisis manager. Negotiations out of the question, all they want is to seize and sell all the debtor’s assets. They do not care that in most cases they can get all their money back much faster and in full if they allow the company to be kept afloat. Practice shows that bankruptcy takes at least three years (unless it is the bankruptcy of a guarantor who has no assets – such proceedings are fast-moving and take about 12 months).
Refusing to relinquish ownership and business management rights, not recognizing the substance and legitimacy of the creditors’ claims all while being on the brink of bankruptcy can sometimes turn up the pressure for the entrepreneur by inviting the threat of criminal prosecution for actions that can be qualified as contrived bankruptcy.
Solution: it is crucial to contact experienced lawyers or attorneys as soon as you realize that bankruptcy is imminent. The larger and more complex the business, the more important it is to have a team of lawyers with different skills. One of them can be an excellent negotiator capable of finding common ground with creditors in all disputes; another can be a brilliant theoretician with a keen eye for the attacking party’s Achilles heel and who is also able to competently cover the defending party’s weaknesses. There is no such thing as an all-in-one lawyer.
The businessman must get thoroughly immersed into the subject at hand to avoid being thrown out of the process ‘thanks’ to his own inactivity and stupidity,