Law Firms Anticipate Surge in Bankruptcies, Attorneys in Demand
Bankruptcies are expected to surge as the economy declines. In fact, new research indicates that filings are already on the rise. U.S. consumer bankruptcy filings jumped 27% nationwide in the first quarter of 2008 compared to the year-ago period, according to the American Bankruptcy Institute (ABI). March consumer filings alone reached 86,165 - up 13% from February. The group, which bases its latest figures on data from the National Bankruptcy Research Center, says that consumers are crumbling under the burden of rising household debt, growing mortgage problems and rising energy prices.
Law firms around the country are gearing up for the increase in bankruptcy filings. Many have already begun expanding their ranks, hiring bankruptcy attorneys and restructuring specialists. Executive search firm, A.E. Feldman, says attorney jobs are opening up for qualified candidates. Opportunities currently exist for bankruptcy attorneys with excellent academic credentials and a proven track record.
Firms Staffing Up
Sheppard Mullin Richter & Hampton added two new partners in the firm’s New York Finance and Bankruptcy practice group. The firm’s Chairman, Guy Halgren, said in a statement, “We continue to grow signature practice groups like Finance and Bankruptcy and expand national capabilities to better serve client needs on both coasts. In the current business climate where restructurings and insolvencies are on the upswing, their bankruptcy and commercial litigation expertise is of even greater value to clients.”
Nixon Peabody has also expanded its Financial Restructuring and Bankruptcy practice. The International law firm just announced the addition of a new partner with broad experience in all aspects of bankruptcy, workouts, distressed situations, derivatives and structured products.
Skadden, Arps, Slate Meagher & Flom also added 17 attorneys to its corporate restructuring team last year and expects to add three more to the ranks over the next two months, according to a WSJ report.
Bankruptcy a Lagging Indicator
Tough economic conditions have law firms anticipating an increase in caseloads for specialists in bankruptcy law. The surge is expected to continue well into 2008. That’s because bankruptcy is a lagging economic indicator. A recent report in the ABA Journal cites Jack Williams, scholar-in-residence for the Alexandria, Va.-based Bankruptcy Institute, as saying, “the impact of bad economic developments doesn’t translate immediately into a sharp hike in bankruptcy filings. That spike generally lags about six to nine months behind the economy.” The ABA Journals also says that Williams predicts the number of filings across the country will rise to between 1.2 million and 1.4 million by the end of 2008. Those figures comprise both individual and business filings.
Businesses to be Next?
Businesses may be the next big wave of bankruptcies. In addition to rising consumer filings, the number of bankruptcies being filed by businesses is also expected to rise as banks clamp down on lending. Distressed-debt investors are already eyeing opportunities, according to MarketWatch.
Distressed investors look to buy the discounted bonds, loans or other debt of companies that have defaulted as well as those on the verge of bankruptcy or financial restructuring. Essentially, distressed investors are making a bet they can ride out the slide and enjoy strong returns after a turnaround.
MarketWatch quotes Keith Rosenbloom, Managing Member of hedge-fund investment firm Care Capital Group, as saying, “The coming boom in corporate defaults is around the corner. I don’t know when the ideal time is going to be, but we’re spending a lot of time looking at various distressed-debt funds.”
