Like many of you, we avoid politics like, well… like a plague, but this story touched off something that we have to deal with every day:

It was announced that the federal government was providing $765 million under the Defense Production Act to help Eastman Kodak set up a new manufacturing division to provide drug products to fight the coronavirus. Kodak announced that it would hire around 360 employees for this new venture. Following the announcement, shares of Eastman Kodak jumped over 200%.

Taking out the direct costs of setting up this new division, this works out to around $2,095,890 per job.

But this is what made the story interesting to us:

Eastman Kodak is an example of someone (in this case a business) successfully using the bankruptcy process.

Let’s start with the facts.

In 1879, George Eastman figured out how to take some of the chemical needs out of the new science of photography. In 1890, he formed the Eastman Kodak Company and leased space on State Street in Rochester, New York to make his dry photography plates. Over the years, his company became a leader in rolled film, and created one of the first amateur cameras. To this day, finding that perfect candid shot is known as a “Kodak moment.” By 1976, Kodak produced 90% of all of the film and 85% of all of the cameras sold in the United States.

But the advent of digital photography wasn’t kind to the venerable company. In early 2004, it announced that it was going to quit selling traditional film cameras. Later that year, it was removed from the Dow Jones. Over the next decade, even as it tried to buy smaller companies in an effort to diversify, it sold multiple divisions and laid of thousands of employees to try and accumulate and save cash. In 2009, after almost 75 years of production, it announced that it was going to quit selling film.

In 2012, after getting a stern warning from the New York Stock Exchange, Kodak filed for Chapter 11 bankruptcy.

Chapter 11, for a business, allows a company like Kodak to remain in control of its assets and operations, and is commonly thought of as a “reorganization.” Kodak tightened its belt, sold what it could, and focused on areas where it was actually making some money.

After a little over a year, Kodak announced that it was emerging from Chapter 11.

For many businesses, ‘bankruptcy’ appears to be a death knell. Sometimes, the announcement that a business is entering into bankruptcy means you won’t be seeing them around anymore. But for many businesses – much like our lucky friends at Eastman Kodak – bankruptcy is a chance to financially straighten things out.

What bothers us is how many of our clients look at bankruptcy with a feeling of guilt. They have a sense that they’ve done something wrong, and contemplating bankruptcy is an admission of failure.

If you get bronchitis, your doctor is going to tell you to take some medicine. If you break your leg, they’re going to put it in a cast until the bone heals.

Nobody tried to give you bronchitis and you likely didn’t try to break your leg.

Bankruptcy is just like that. It’s a tool to buy you time to financially heal. It’s a tool used by thousands of companies and millions of individuals all the time.

Exploring bankruptcy is a prudent step towards recognizing and solving your issues with debt. No more, and no less. You should feel good about that.

  • Fun Fact: Eastman created the word “Kodak” using an anagram set with his mother. He wanted something strong, and liked the letter “K.”