Three Ways to Avoid Going Bankrupt

It's not as if the hotels are sitting vacant. In its court filing, the company acknowledged it had positive cash flow but was "significantly" over-leveraged. Money is continuing to come in, but it's not enough to service all that debt.

It's the same fix faced by media giant Tribune. Saddled with crushing debt after going private, its newspapers were crippled by a slowdown in advertising and falling circulation. If Tribune didn't have that debt, the company might have been able to muddle through. Instead, it went bankrupt.

2. Grow slow and smart: Time and again, we've seen big companies overreach. When times are good, they take out loan after loan to expand. They buy out competitors, build new locations, double or triple their workforce. All that investment can pump up the stock price for a while, but CEOs sometimes forget that eventually, the bill comes due.

That's what happened to mall operator General Growth Properties(GGP Quote), which racked up $27 billion in debt buying up properties across the country. Becoming an industry leader may have been good for the company's image. General Growth became the second-biggest mall owner in the country. But who cares about rankings when you go bust?

Remember, General Growth's bankruptcy doesn't mean its malls aren't bringing in money. According to the company, its properties had an occupancy rate of 92.5% at the end of 2008. The company was able to make its debt payments until last fall, when the credit crunch left it unable to refinance loans that came to maturity.