Could BP declare bankruptcy to avoid paying for the damage done to the Gulf of Mexico?

From the Atlantic:

There is a reasonably high chance that BP could file for Chapter 11 bankruptcy in the next few years, or even months, and the result would be an "absolute horror" for the government, according to a bankruptcy expert.

Peter S. Kaufman, the President of investment bank Gordian Group and head of the firm's Restructuring and Distressed M&A practice, told me that if he had BP's ear, "I'd advise them to explore the option of bankruptcy." If he had the government's ear, he'd tell them to stop berating the company to the point where BP would find it appealing to use bankruptcy to limit its liabilities.

The specter of Chapter 11 bankruptcy terrifies Gulf residents because it could allow BP to delay, or even avoid, paying billions of dollars to businesses and individuals affected by the Gulf spill. The chapter is specifically for companies in temporary financial trouble who can reemerge as viable if they receive new funding, cancel burdensome contracts and delay, restructure, or wall off repayment obligations.

What would a BP bankruptcy look like?

It could work a lot of different ways. They could cut loose BP America and it could be BP America that files for bankruptcy. My presumption is that it's BP America that's responsible for the spill. They can wall off the non-BP America assets from the Gulf -- which is about 50% of the company's net value --and try to reorganize BP America. That's likely to take a very long time, and BP would not make good on its promise for the 20 billion [in the escrow fund].

Or they could file all of BP, and do so in London. Wonder how well-received our government and legitimate Gulf claimants would fare in a British insolvency court?

I would hope that making a decision this radical would be completely off of the table for BP, but considering how much the Gulf clean up may eventually end up costing the company it is naive to believe that this will not at least cross their collective minds. And if they DO make that choice, simply put, we are screwed.

And while we are on this subject here are 15 Gulf Oil Spill Myths that you can digest as well.

There is a lot of very interesting and frightening information on that list. Here is just one part that really caught my eye:

Myth. Republicans may scream "drill, baby, drill" louder, but when it comes to political money being spent to influence government, it's more or less a tie. Key Democrats are among the top recipients of political money from oil companies, as are Republicans. The money flows to those in oil-rich states, to high-profile candidates and those with the most power in Congress (ie, the chairs of key committees). Here's a look at the Friends of Earth tally of opensecrets.org data, showing the biggest recipients of money from BP and other oil companies since 2006:

Senate


* John McCain (R-AZ) - $36,649 from BP; $2.43 million total
* Mary Landrieu (D-LA) - $16,200 from BP; $329,100 total
* Mark Begich (D-AK) - $8,550 from BP; $85,958 total
* Lisa Murkowski (R-AK) - $8,500 from BP; 223,326 total
* Mitch McConnell (R-KY) - $8,500 from BP; 408,400 total

I believe that may go along way toward explaining why Alaska is still pushing hard to open new deep water drilling projects while the Gulf is currently hemorrhaging oil.