Bankruptcy

Coramoor · #1 11-08-2005, 01:19 AM

I was just giving this some thought...

But what would actually happen to a major frat or a sorority if it was sued and went bankrupt?

Some nationals have 100, 150, 200+ chapters. I don't see how they would just not exist anymore. The men and women are still there, and most have alumni that own their houses-not nationals.

Just change their names and keep on truckin?

AchtungBaby80 · #2 11-08-2005, 01:28 AM

Wow, that's a good question. Certainly something to think about.

kddani · #3 11-08-2005, 07:38 AM

Declaring bankruptcy doesn't necessarily mean the end of an org. For example, so many of the airlines have declared bankruptcy, but they're still in existence. Bankruptcy law is pretty complicated, and i'm not sure of the particulars of bankruptcy of a non-profit org. Of course, regardless, it would be a huge deal and I don't know how what would happen.

If people would stop f'in up and doing stupid stuff, i.e. totally violating policies and being drunken fools, we wouldn't have to worry. But a lot of us do worry, particular with what some of you say your chapters get away with.

ZZ-kai- · #4 11-08-2005, 09:36 AM

I think most fraternities and sororities have a foundation, of which claims most of the their assets. This foundation does not act with the day-to-day portion of the fraternity administration and the chapters. Therefore, when a lawsuit comes through, the foundation and it's assets are safe because it's a different 'entity' so-to-speak. Plus, I am sure they all have insurance of some sort that would take the brunt of the lawsuit, which is why we have insurance.

Tex1899 · #5 11-08-2005, 10:34 AM

Most nat'l orgs have an insurance policy plus an umbrella policy. Unless things have changed within the last 12-18 months, the largest umbrella policy is $5 million (there might still be a couple with a $10 million policy).

If a fraternity loses a judgment of $6 million or more ($1 mil. liability + $5 mil. umbrella), they're in big trouble.

Fraternities are like California...just waiting for the "BIG ONE" to hit. And I hope and pray that it doesn't happen...and if it does, that it's not my fraternity.

Tom Earp · #6 11-08-2005, 07:09 PM

Insurance Policys are not a panaseea!

Look how much it cost each Chapter for RM Insurance! How much cheaper woud dues be if not for that?

I Dont know of any GLO that is not on the edge of Budget Constraints.

Yes, there are Trusts that are set aside for Education Projects.

When I say Education Projects, that is the only thing that is tax deductable.

So, how long can a GLO last with Labor costs.

How much does it cost to haven people on the Highways working with Chapters for the GLOs that do this anymore? Dang Few. Most become volunteer Alums who do it for Love only. How long can they hang their necks out?

Most Insurance Policys are High Risk Polocies and cost a Ton Of Money!

Figure up how much it cost per Member and then go from there.

Zillini · #7 11-09-2005, 06:45 PM

Here's our brush with bankruptcy, though it wasn't due to a lawsuit. Just poor money management.

When I first became an Advisor 10 years ago, I was shocked to find this chapter on the verge of bankruptcy for a variety of reasons. Mostly it boiled down to over-spending and under-collecting. We took out a fairly sizable loan from our House Corporation (their Building Fund) and were able to turn things around within a year with solid budgeting, book keeping, changes in billing and collections.

It was after we'd resolved our financial problems and nearly repaid HC that I went to my first district training seminar. I was shocked when I got raked over the coals by our then Intl Treasurer for taking a loan from HC. According to her if we hadn't been able to repay the loan we might have forced HC into bankruptcy as well. If the chapter had gone under, the HC as a seperate legal entity would not be obligated for the chapter's debts. Therefore the (physical) house would be safe and Int'l could re-charter.

I asked her if we should have gone to Int'ls for a loan and she never really answered. I was left with the impression that we would have been turned down, probably because it was caused by mismanagement rather than legitimate expenses such as remodelling or construction.

Tom Earp · #8 11-09-2005, 07:22 PM

Quote:

Originally posted by Zillini
Here's our brush with bankruptcy, though it wasn't due to a lawsuit. Just poor money management.

When I first became an Advisor 10 years ago, I was shocked to find this chapter on the verge of bankruptcy for a variety of reasons. Mostly it boiled down to over-spending and under-collecting. We took out a fairly sizable loan from our House Corporation (their Building Fund) and were able to turn things around within a year with solid budgeting, book keeping, changes in billing and collections.

It was after we'd resolved our financial problems and nearly repaid HC that I went to my first district training seminar. I was shocked when I got raked over the coals by our then Intl Treasurer for taking a loan from HC. According to her if we hadn't been able to repay the loan we might have forced HC into bankruptcy as well. If the chapter had gone under, the HC as a seperate legal entity would not be obligated for the chapter's debts. Therefore the (physical) house would be safe and Int'l could re-charter.

I asked her if we should have gone to Int'ls for a loan and she never really answered. I was left with the impression that we would have been turned down, probably because it was caused by mismanagement rather than legitimate expenses such as remodelling or construction.

What most Members of GLOs do not or will not understand is the Nationals are Not a Bank for them and do not have the Money!

While I know Several HQ Presidents, They are in the same Canoe as all of us.

The Money that is donated by Alums can acturally be used only for Educational items and used for Govt. Tax deductions not running the day to day opporations of GLOs. That is why so many have gone to Volunteering by Alums for OUR ORGANIZATIONS!

It amazes Me whe People see the money flows in to HQ, it can onlly be used for certain things.

Most GLOs work on a slim margin and that is why We as Alums need to donate.

This is not only on a HQ level, but at the local Chapter Level!

Budgeting is a guessing game on How Much Money will or maybe be coming in! If it is Budgeted, make sure there is flexibilty to cut back if it isnt there!

If it is not, Dont spend, plain and simple!