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November 15, 2008

Chapter 11 Analysis from Profs Warren and Westbrook

This article, "Chapter 11: Conventional Wisdom and Reality," with more mind-boggling data, is about a year old but has some really useful information on the uses and successes of "a cross-section" of chapter 11 cases.  The total assets in the cases studied range from $13 (dollars) to $19 billion.  The article can be accessed here. 

The facts that struck me are:

  • 70% of the cases, where the debtor proposes a plan, result in a confirmed plan.
  • 47% of all cases not "booted out" within six months result in a confirmed plan.
  • 82% of small business cases which confirmed a plan did not do so within six months, i.e., the new times limits of BAPCPA create serious risk of failure where a little more time may have resulted in success.
  • Chapter 11 liquidation plans are about 30% of the total plans confirmed. 
  • in 62% of confirmed plans, the original owners retained an equity stake. 
  • individual chapter 11s were about 11% of the total cases filed (in 2002 decreasing from 25% in 1994).
  • about one-third of all chapter 11 cases result in confirmed plans, not the 15-17% touted as the conventional wisdom.
  • About half of all cases that do not file a plan within six months are "booted out."  The courts do a very good job, according to the authors, of weeding out the DOA cases early.   

November 15, 2008 in Article Reviews | Permalink

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