# Could BP Just Declare Bankruptcy & Walk Away? **URL:** \ **Category:** Factual Questions\ **Created:** [June 4, 2010, 10:16pm UTC](https://boards.straightdope.com/t/could-bp-just-declare-bankruptcy-walk-away/541988 "2010-06-04T22:16:19Z")\ **Posts on this page:** 5\ **Page:** 3
**Author:** ![md2000](https://avatars.discourse-cdn.com/v4/letter/m/73ab20/32.png) [@md2000](https://boards.straightdope.com/u/md2000)\ **Post date:** [June 10, 2010, 3:16pm UTC](https://boards.straightdope.com/t/could-bp-just-declare-bankruptcy-walk-away/541988/41 "2010-06-10T15:16:26Z")
> [@Hari\_Seldon](#): > > This article is rather speculative: > [http://www.nytimes.com/2010/06/08/business/08sorkin.html?scp=1&sq=BP%20bankruptcy&st=cse](http://www.nytimes.com/2010/06/08/business/08sorkin.html?scp=1&sq=BP%20bankruptcy&st=cse) > It suggests that it may be possible for BP to split in two, one company of which will keep all the liabilities and the other as much of the assets that they can get away with. The former would go bankrupt, while the latter might be sold to one of the other majors. > > I didn’t think this was possible, but what do I know about business law. It strikes me that a serious possibility is that BP America could be split off from the international company. The article suggests that their liabilities could go as high as $40B. Supposedly liabilities for damages to third parties are limited to $75M, but you have to go into court with “clean hands”, which BP doesn’t have, in order to benefit from that limit. > > The article mentions that Exxon was originally fined $5B; this was reduced to 2.5B, then to .5B and finally SCOTUS canceled the fine. So they paid some (probably minimal) damages, but no fine. Not sure what the law is in the USA, but in Canada there’s the principle that transactions undertaken to escape the consequences of bankruptcy can be undone by the courts. I assume the same applies in Britain. ---
**Author:** ![Exapno\_Mapcase](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/exapno_mapcase/32/1051_2.png) [@Exapno\_Mapcase](https://boards.straightdope.com/u/Exapno_Mapcase)\ **Post date:** [June 10, 2010, 4:31pm UTC](https://boards.straightdope.com/t/could-bp-just-declare-bankruptcy-walk-away/541988/42 "2010-06-10T16:31:34Z")
> [@Hari\_Seldon](#): > > This article is rather speculative: > [http://www.nytimes.com/2010/06/08/business/08sorkin.html?scp=1&sq=BP%20bankruptcy&st=cse](http://www.nytimes.com/2010/06/08/business/08sorkin.html?scp=1&sq=BP%20bankruptcy&st=cse) Buried deep in that article is this important line: > [@](#): > > There are many people — besides BP — who think even discussing the possibility of a bankruptcy or takeover is silly. After 50 days, a new line of chatter, gossip, and speculation is called for because everybody’s getting bored with the old news. Worst case scenarios are the most fun to write. You never have to be right - after all, you said up front they were the worst case and the worst case seldom happens in reality - so you can speculate to your heart’s content. Anything could yet happen. But a bankruptcy/merger is still way low on that list. ---
**Author:** ![Francis\_Vaughan](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/francis_vaughan/32/3093_2.png) [@Francis\_Vaughan](https://boards.straightdope.com/u/Francis_Vaughan)\ **Post date:** [June 11, 2010, 7:52am UTC](https://boards.straightdope.com/t/could-bp-just-declare-bankruptcy-walk-away/541988/43 "2010-06-11T07:52:55Z")
If on the other hand you were a very savvy financier, with a lot of media connections and respect in the oil finance arena, and you took a short position on BP just after the spill, and you were spending every waking hour since then running BP down, in print and on TV talk shows. Well you could become very very rich. ---
**Author:** ![Markxxx](https://avatars.discourse-cdn.com/v4/letter/m/5daacb/32.png) [@Markxxx](https://boards.straightdope.com/u/Markxxx)\ **Post date:** [June 11, 2010, 12:34pm UTC](https://boards.straightdope.com/t/could-bp-just-declare-bankruptcy-walk-away/541988/44 "2010-06-11T12:34:54Z")
The thing about a situtation like this is you want to minimize your obligation. This is where creative accounting comes into effect. As Miss Jane from the “Beverly Hillbillies” once said “Mr Clampett, it’s not illegal to \*AVOID \*taxes as long as you do not _EVADE_ them.” And this is a similar situation. BP doesn’t want to evade paying out their reparations, but they want to avoid it unless 100% necessarily This essentially breaks into two parts. First are direct costs. These are relatively easy to sort out. Some guy has his home on the Gulf covered in oil. It’s pretty easy to show and to prove, that BP is going to be responsible for repairing that damage. But the tricky part is as you go layer from layer. For example, if I own a fishing boat, the fish are covered in oil. Therefore my income drops. I should get reparations from BP. Pretty clear cut. But what about the guy who owns a resturaunt where I sell my fish. He’s famous for serving the fish I catch. His business falls. This is not a direct hit, but it’s a hit that is one step removed from the direct hit. OK, what about the city of Biloxi that advertises it’s tourism. And let’s say a big part of this is centered around my resturaunt that serves the fish, that is now covered in oil. Now this case is TWO steps above the direct link. And so forth, each link gets a bit further away from the original source of damage. These are the cases that drag on. The law recognizes damage claims but one must mitigate that damage so that it’s the least costly. So while BP has money to cover the damage, it is certainly looking at ways NOT to pay out those monies, at least to those will less direct claims. And there are, for lack of a better word, “creative,” ways to do this, using accounting and rules of incorporation. For instance, spinning parts of companies off into separate entities. Now obviously if you were doing this to create a shell company that could be bankrupt you’d have to be closely examined. But that doesn’t rule it out entirely. For instance a person can’t charge up his credit cards to the hilt then declare personal bankruptcy, but he can charge necessities of life up till the day he files. It has taken over 25 years for some of the claims for the Exxon/Valdez to settle, so you can expect to see BP in court for decades over this, if not even more. So the idea is to spin off assets and monies into safe areas so that a bankruptcy, if it came to that, would have to pay out as little as possible. Again, with a disaster this size, it’s not likely to happen, and even if it were tried, there’d be close scrutiny but doesn’t mean it can’t be done. This “crisis” is only as problematic, till the next big thing knocks it off the front page, then BP can plan without the media attention. ---
**Author:** ![LonghornDave](https://avatars.discourse-cdn.com/v4/letter/l/a87d85/32.png) [@LonghornDave](https://boards.straightdope.com/u/LonghornDave)\ **Post date:** [June 11, 2010, 12:41pm UTC](https://boards.straightdope.com/t/could-bp-just-declare-bankruptcy-walk-away/541988/45 "2010-06-11T12:41:34Z")
> [@Markxxx](#): > > So the idea is to spin off assets and monies into safe areas so that a bankruptcy, if it came to that, would have to pay out as little as possible. > > Again, with a disaster this size, it’s not likely to happen, and even if it were tried, there’d be close scrutiny but doesn’t mean it can’t be done. The term for what you are talking about is fraudulent conveyance. Obviously it is a recognized problem that people might try to transfer assets away from themselves prior to a bankruptcy. This would be essentially impossible for BP North America to do. [Previous page](https://boards.straightdope.com/t/could-bp-just-declare-bankruptcy-walk-away/541988.md?page=2)