19 Mar Washington Post Says We Are Headed Towards A Boom In Bankruptcy Filings
The Washington Post headline reflects what business bankruptcy attorneys are telling me. Businesses are in trouble and many will be faced with difficult decisions about closing, selling or restructuring companies. This is just another reason that personal bankruptcies will also rise this year.
The public perception of individuals who file for bankruptcy is often that bankruptcy debtors are people who don’t pay their debts because they have over spent or done something wrong. In reality, many bankrupt debtors will likely be the workers laid off by the businesses that close, restructure and/or go bankrupt.
The irony is that under the new law, many individuals will have faces issues when filing bankruptcy under BAPCPA (the 2005 Bankruptcy Law) because even if they are unemployed, the new bankruptcy law assumes that they are being paid what they had been paid for the last six months.
This doesn’t mean that people can’t file – many will be able to do so – but it is very important to see an experienced lawyer sooner rather than later. An attorney will review options with you, which may include bankruptcy if appropriate. She will explain how bankruptcy works and what is involved with Chapter 7 and Chapter 13 bankruptcy.
Attorneys may be able to help people protect their retirement plans and severance pay to preserve whatever can be protected from creditors. In the months that it can take to find a new job, every resource should be protected so that families can have a roof over their heads and food on their tables.
See also my article: BAPCPA The New Bankruptcy Law: A Mean Law Oct. 17, 2007
Read the Article:
By Anita Huslin
Washington Post Staff Writer
Wednesday, March 5, 2008;
The business of bankruptcy is beginning to pick up.
In recent weeks, retailers Lillian Vernon, Sharper Image and Atari filed for protection from their creditors, becoming the latest casualties in what the International Council of Shopping Centers projects could be a year in which nearly 6,000 retail stores close.
The Sharper Image is one of 18 U.S. companies to file for bankruptcy in the first two months of 2008, twice the amount in the similar period last year. (By Paul Sakuma — Associated Press)
In the first two months of 2008, 18 U.S. companies with liabilities of $12.4 billion sought bankruptcy protection — twice as many as those who filed in the comparable period a year earlier and with a debt level four times higher, according to data from New York University‘s Salomon Center for the Study of Financial Institutions.
The professionals who make their livings off these transactions — attorneys and management and financial consultants — are gearing up.
“A year or two ago, perhaps 5 percent of firms would say they’re thinking about adding bankruptcy attorneys,” said Jon Lindsey, managing partner of Major, Lindsey & Africa, a New York executive placement firm specializing in lawyers. “Now it’s about 85 percent. A few are far-sighted and strategic enough to say we will bring these people on, overpay them for first six months [before business picks up] . . . to have someone who knows how to pilot the lifeboat when the wave hits.”
The competition has begun. More than 70 lawyers from various firms recently showed up in federal bankruptcy court in Delaware to vie for the business of Sharper Image’s creditors.
Evelyn H. Biery of Fulbright and Jaworski leads one of the largest bankruptcy and insolvency practices in the country, with offices in Washington and 15 other cities worldwide. She said she plans to double the number of lawyers to handle the surge, which is expected to cover businesses of all sizes. If there is a lesson in some of the larger bankruptcies happening now, she said, it is the value of restructuring sooner rather than later.
Many of her clients show up at her door when they are at or near rock bottom, a distinction that can make the difference between a successful restructuring and the worst-case scenario: liquidation.
“Many business owners, like American consumers, will go into a state of mild to deep depression, and through inaction lose their opportunity to fix the problem,” she said.
Bankruptcy in any form can be disruptive, forcing layoffs, budget cuts or worse.
While there is evidence that large business bankruptcies are on the uptick, smaller businesses are probably also in distress because of the tightening credit market and decline in retail sales. Small- to mid-cap businesses are more likely to have been capitalized by credit cards or second mortgages, said Jack Williams, a Georgia State University law professor and scholar in residence at the American Bankruptcy Institute.
In Delaware, where many companies are incorporated because of the tax advantages, law firms have been preparing for the past several years in anticipation of the bankruptcy boom, said Tony Clark, head of Skadden, Arps, Slate, Meagher & Flom’s reorganization practice, which last year had revenue of more than $2 billion.
“Partners who specialize in reorganizations have been particularly hot in the last 18 months,” he said. “Their practices were very slow, but people who do what I do saw the downcycle coming, and saw that bankruptcy and restructuring work will be picking up.”
“It’s just starting, and it’s in baby steps,” said Michael Sandnes, managing director of Executive Sounding Board Associates, a Washington area bankruptcy attorney and turnaround specialist involved in the reorganization of a family-owned printing business and a Northern Virginia car dealership.
“Last July, I couldn’t find any appointments,” he said. “Within the last 30 days I’ve booked five engagements, and it doesn’t show any signs of letting up.”
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