Law Firms Waiting … and Waiting … for Anticipated Bankruptcy Cases
Bankruptcy cases are on the increase, but not to the extent anticipated by law firms that have geared up for an onslaught of bankruptcy work.
“We’re just not seeing the flood that everyone’s been expecting,” Stephen Selbst, a bankruptcy lawyer at Herrick, Feinstein, told the Wall Street Journal (sub. req.).
The reason may be a 2005 change in bankruptcy laws making Chapter 11 less attractive for corporations, the story says. The law makes bankruptcy more expensive, restricts debtors’ ability to jettison expensive leases, and makes it more difficult to retain and compensate some personnel. Corporations are also having trouble getting financing to cover big injections of cash required when the case is filed and when it wraps up.
The newspaper predicts that lawyers representing troubled companies will likely be working to reach settlements with creditors rather than filing for bankruptcy. Those companies that do opt for bankruptcy may seek quick liquidations if they can’t obtain financing for the cash infusions needed, according to the story. That means fewer long-term restructurings.
