As a business owner you undoubtedly will be involved in one aspect or another of a Chapter 11 bankruptcy case. Representation by a competent bankruptcy professional is imperative to protecting your interests because the practice is fast-paced and requires intimate knowledge of a specific and complicated federal statutory scheme (the Bankruptcy Code), as well as of the local rules and procedures of the specific bankruptcy court in which the debtor’s Chapter 11 case is pending. In fact, most lawyers you may use on a regular basis for normal litigation or transactional matters know very little about bankruptcy, as they do not practice it regularly and often never had a class on it. Given such a landscape, many business owners finding themselves needing to consider a bankruptcy filing or being involved as a creditor in a Chapter 11 bankruptcy case are often left wondering how they can make an intelligent decision in selecting effective counsel. This article provides a few pointers to consider.
First, it is advisable to seek an attorney whose practice is generally focused on Chapter 11 matters, and not Chapter 7 or 13 consumer cases, because Chapter 11 practice itself involves specific statutes and requirements, many of which are not applicable in consumer bankruptcy cases. Given the tremendous economic hardships of the past few years however, it is an unfortunate reality that many attorneys who lacked significant experience in Chapter 11 practice, or who even lacked significant experience in bankruptcy altogether, have gravitated toward Chapter 11 practice as it has been a “hot” area with significant available work. It is very difficult for an attorney with less than at least five or ten years’ of bankruptcy experience to adequately represent your interests, especially if you are a prospective debtor.
Second, it is advisable to seek a Chapter 11 bankruptcy attorney who has experience working both sides of the aisle—that is, experience in representing not only Chapter 11 debtors and Chapter 11 trustees, but also in representing creditors and creditors’ committees in bankruptcy cases. Such an experienced counsel is in a best position to understand how the other side is thinking, having been there themselves in other cases. Don’t be afraid to ask to see a list of the attorney’s significant recent representations. Such a breadth of experience allows an attorney an ability to think forward in a bankruptcy case and to anticipate events instead of simply reacting to the situation.
Third, and especially if you are seeking Chapter 11 debtor’s counsel, don’t be afraid to ask for a list of cases that the attorney has successfully completed through to confirmation of a Chapter 11 plan of reorganization, not simply filed. Chapter 11 bankruptcy cases are easily filed, but often difficult to see through to a successful end. It is another unfortunate reality that many Chapter 11 cases do not survive for more than a few months after they are filed for one reason or another. This is often because the bankruptcy case was not feasible, but it also happens because a Chapter 11 debtor was underserved by inexperienced counsel who let the case get away.
Fourth, don’t get hung up on an attorney’s hourly rates, as experience costs money, but is most likely less expensive in the long run. For example, it is very difficult for a bankruptcy attorney representing a Chapter 11 debtor to do an adequate job all the way through to plan confirmation at the end of a bankruptcy case for a “flat fee” of $10,000 or even under $20,000. I have seen cases where a debtor’s counsel was chosen for the representation by quoting some ridiculously low rate or “flat fee,” only then to do minimal or shoddy work, ignore client communications, send inexperienced associates to attend court hearings, and simply not comply with the requirements imposed on a debtor’s counsel. Any one of these issues could result in the bankruptcy case being dismissed or converted to a Chapter 7 liquidation.
Matthew Zirzow is a shareholder with the law firm of Gordon Silver where he has worked in the Business Restructuring & Bankruptcy Practice Group for more than thirteen years.
Gordon Silver, www.gordonsilver.com