What's so bad about bankruptcy?

Jonathan Lipson asks this about Bear/Morgan deal:

Today’s New York Times reports that both shareholders and lock-up acquiror JP Morgan-Chase have threatened to put the financial firm into bankruptcy if the other doesn’t blink. But, if bankruptcy is the only thing both sides agree on, why doesn’t the board authorize a chapter 11 filing?

He goes onto show why bankruptcy would not actually have been that bad. And in retrospect, given the mess that’s developed, one might ask how it could be worse.

But even if bankruptcy isn’t as bad as it could be, is it worse than it needs to be? A unilateral filing Bear at least significantly changes the terms on which it deals with all of its constituencies, and imposes more than a few bucks worth of dislocation. 

So the Bear scenario gives us a chance to rethink two age-old questions about bankruptcy: the Baird-Jackson question of the extent to which disrupting contracts and state law rights is justified by the policies underlying bankruptcy; and whether bankruptcy ought to be subject to contract – either directly or by jurisdictional choice.