Strategic Bankruptcy: How Corporations and Creditors Use Chapter 11 to Their Advantage

In 1982 Johns-Manville, a major asbestos manufacturer, declares itself insolvent to avoid paying claims resulting from exposure to its products. A year later, Continental Airlines, one of the top ten carriers in the United States, claims a deficit when the union resists plans to cut labor costs. Later still, oil powerhouse Texaco cries broke rather than pay damages resulting from a courtroom defeat by archrival Pennzoil.

Bankruptcy, once a term that sent shudders up a manager's spine, has no...