Will BP file for bankruptcy?

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...

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...

BP has a lot of cash and the ability to generate huge amounts of cash. But remember, just because BP can pay claims doesn't mean they should, or that they will, given that their primary obligation is to their shareholders...

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]...

It would be a mistake, in my judgment, to view BP as a political piñata that can be beat around the head repeatedly without consequences. It's not reasonable to expect BP to pay unlimited liabilities and face criminal charges, and the United States needs to understand the size of the gun BP can pull...

More at The Atlantic.