During the recent debate between the Republican candidates for Lt. Governor, I learned of an attack against Senator Dan Patrick over his bankruptcy in the late ‘80s. The attack struck me initially as a cheap shot because bankruptcy is a legitimate way for debtors to deal with their default and is nothing to be ashamed of. However, more importantly, I’ve learned now that the attack is truly bogus and that the bulk of the “debts” complained about by Patrick’s adversaries were property leases and bank loans.

During the debate, the liberal media moderators engaged in a bizarre round of attack questions on each candidate. Lt. Gov. Dewhurst was questioned about being absent at dinner during the critical Wendy Davis filibuster of pro-life legislation during the special session last year. Staples was questioned about his flip-flopping on in-state tuition for illegal immigrants. Patterson was questioned over his plans to take his legislative pension at the same time as taking his salary, if he is elected to office.

The attack on Senator Dan Patrick was over his bankruptcy in the ‘80s. Patrick responded to the attack, noting that he had a business that failed at that time and that, like many Americans, he used the bankruptcy process to get back on his feet and become successful again. The moderator noted that Patrick supposedly had outstanding debts remaining after the bankruptcy process and asked whether Patrick had an obligation to pay back those creditors now that he was back on his feet.

It is important to remember that bankruptcy is a legitimate option for debtors and is nothing to be ashamed of. Bankruptcy is the free market alternative to bail-outs when dealing with defaults. When he was forced into bankruptcy, Patrick was forced to give up everything he owned, save a few items such as his homestead and vehicle which we protect by law. He was given an opportunity to start anew with almost nothing and his success in life since them is a tribute to his character. The alternative to bankruptcy is either the bailout — where the taxpayer steps in to absorb a debtor’s losses — or enslavement to creditors. To leave debts hanging over a person’s head after the bankruptcy process would render the process meaningless.

But astoundingly, the attacks against Patrick over his bankruptcy are rendered even cheaper when one learns of the nature of the largest “debts” extinguished by the bankruptcy court. While reviewing attacks by Senator Patrick’s opponents, I learned that the three largest and dominant debts that Patrick’s critics are citing are $384,000 on a lease with Houston landlord Victor Denenburg, $125,000 on a lease with Dallas developer Trammell Crow, and $103,790 on a loan with Texas Commerce Bancshares-Champion Park. It is important to note that the amounts for the leases represent their future value. It is highly probable that the leased premises were promptly filled by other tenants after Patrick vacated them, thus mitigating the losses to the landlords.

If the attack on Patrick is over property leases and bank loans, it really is much ado about nothing. Leases are broken all of the time. While 16th century common law might have required a lessee to pay the full term of a lease regardless of use, modern law is much different. Lessors are expected to re-lease property when it is vacated and vacating tenants are rarely forced to pay for the full term of their lease in such situations. Likewise, bank loans are made with the assumption that some of the businesses receiving loans will fail. The risk inherent in loans is built into the interest rate.

As an attorney, I know that the bankruptcy process is designed to ensure that creditors receive fair treatment while debtors are given an opportunity to get back on their feet. In this case, it appears the bankruptcy court got it right. The holders of the property leases were expected to find new tenants for their properties. The bank which made a loan to Mr. Patrick’s businesses made a bad bet. And the process certainly was not a pleasant one for Patrick to undergo.

For Patrick’s opponents to harp on this issue today tends to show that they are either out of touch with the facts or out of touch with the important purposes bankruptcy provides. However, more likely, it shows that they are trying to score cheap political points by attacking Patrick on obscure personal issues rather than addressing substantive policy differences.

Tony McDonald

Tony McDonald serves as General Counsel to Texas Scorecard. A licensed and practicing attorney, Tony specializes in the areas of civil litigation, legislative lawyering, and non-profit regulatory compliance. Tony resides in Austin with his wife and daughter and attends St. Paul Lutheran Church.

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