You are using an outdated browser.
Please upgrade your browser
and improve your visit to our site.
Skip Navigation

Bankruptcy Judges Are Powerful

Okay, you already knew that--they're basically czars of the companies that slouch into their courtrooms. But did you realize they were this powerful?

One reason Chrysler needs to file for bankruptcy protection is so that Fiat can clear out hundreds of auto dealers from its sales network, which is easier to do in bankruptcy where dealer franchisee agreements can quickly be rejected or amended. The auto maker also has asbestos and environmental liabilities that Fiat doesn't want and are more easily shed in bankruptcy court.

I had no idea a bankruptcy judge could make environmental liabilities disappear. If there's a bankruptcy lawyer out there who wants to shed light on what a bankruptcy judge can and can't do, by all means e-mail me at What if a company owed hundreds of millions of dollars in back-taxes to the IRS? Could a bankruptcy judge wipe that out, too? Seems strange...

Speaking of Chrysler, Felix Salmon makes a good point about its likely structure after emerging from bankruptcy:

One of the more interesting things going forward will be how Chrysler manages to turn itself into a smaller, nimbler, change-oriented company while being majority owned by the UAW — which is nobody’s idea of a change agent. In general, if you need a dose of creative destruction, big unions are not the place to look.

Indeed. As long as we were going with a union, I'd have prefered to see Andy Stern in charge.

--Noam Scheiber