Bankruptcies Surge in 2008, Firms Bolster Legal Teams
The number of people and businesses heading to bankruptcy court surged in 2008, approaching one million filings, according to statistics recently released by the Administrative Office of the U.S. Courts. Bankruptcy filings jumped 29% in the 12 months ending June 30, according to the government data. Moreover, total filings surged to 967,831 from 751,056 a year ago. USA Today reports that 71 public companies with more than $75.8 billion in assets have filed for bankruptcy this year, citing research from BankruptcyData.com. That tops the level of assets in bankruptcy in all of 2007. Reuters quotes George Putnam of New Generation Research, which publishes BankruptcyData.com as saying, “We seem to be in the midst of a ‘perfect storm’ leading to more bankruptcies: high levels of debt, high energy and raw materials costs and weakness in the U.S. economy.” In fact, Putnam forecast bankruptcies could peak as early as the middle of 2009 or continue rising well into 2010.
Mitch Feldman, President of executive search firm, A.E. Feldman, says the trend is creating opportunities for candidates with expertise in underwriting, restructuring, valuation and loan workouts. Law firms around the country are also gearing up for the increase in bankruptcy filings. Legal Times says the legal fees generated for firms helping to clean up the mess could reach into the hundreds of millions. The report goes so far as to suggest that billable hours in subprime litigation will surpass those accumulated during the accounting scandals of recent years. As a result, A.E. Feldman says legal jobs are opening up for candidates with excellent academic credentials and a proven track record. Many firms have already begun expanding their ranks, hiring bankruptcy attorneys and restructuring specialists.
Business filings jumped more than 41% to 33,822 from 23,889 in the year-ago period, according to the Administrative Office of the U.S. Courts. Personal filings totaled 934,009, up 28% from last year. Meanwhile, the data also showed that filings for Chapter 7 (individual debtors are given a “fresh start” by discharging many of their debts) rose 36% to 615,748 in the 12 months ending June 30. Total Chapter 13 filings (debtors must pay back their debts over time) rose 17% to 344,421 from 294,693 a year earlier. Lastly, filings for Chapter 11 bankruptcy, which is aimed at assisting struggling corporations or partnerships, rose more than 30% to 7,293.
So far, filings for the June quarter are the highest of any quarter in fiscal year 2008, reports the government office. Filings for the three months ended June 30, also saw the biggest jump since the last quarter of 2005. Bankruptcy cases surged in late 2005 because of the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), which made it harder for individuals to receive Chapter 7 bankruptcy protection. Lawmakers who voted in favor of the law include Republican Presidential contender, John McCain. Democratic presidential candidate Barack Obama, voted against the act, although Sen. Joe Biden, Obama’s pick for Vice President voted in favor of the law.
“The continued rise in bankruptcies to their highest levels since Congress changed the law points to the growing strain on family budgets,” ABI Executive Director Samuel J. Gerdano told the American Bankruptcy Institute. “We expect this trend to continue through the end of the year, with cases surging past one million by year end.”
Amid the onslaught of bankruptcies, law firms are seeing a steady increase in demand for legal services. Looking ahead, top firms are betting that bankruptcy and restructuring work will be their most promising avenue of growth.
To learn more about these issues or inquire about existing and future job opportunities in restructuring, valuation and loan workouts as well as bankruptcy law, the lines of communication are open. Contact A.E. Feldman’s President, Mitch Feldman, and the firm’s expert recruiting team here.
