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.
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