The Wired GC — which is an excellent blog resource for any attorney who is, or advises, a general counsel of a company — has this interesting post today about the tough decisions that some currently troubled companies currently have regarding whether they should risk a delay in filing a reorganization case under chapter 11 until after the new Bankruptcy Code Amendments of 2005 go into effect on October 17. The Wired GC also points to this handy summary by Lorraine S. McGowen of the Orrick firm regarding the changes in chapter 11 practice that will result from the amendments.
My sense is that the October 17 effective date will generate a few more reorganizations than normal over the next couple of months, but not that many. Certainly, if a company knows that a chapter 11 filing is inevitable in the near future, then filing a case sooner rather than later makes sense in light of the impending changes to the Bankruptcy Code. However, management of even the most financially-challenged companies rarely believe that bankruptcy is inevitable, so most companies will take their chances with filing under the amended Bankruptcy Code, if necessary. Finally, the Wired GC speculates that the effect of the new amendments may be to increase the number of reorganizations that end up in liquidation, which — as we have seen in regard to the legacy airlines — may not be all that bad a thing.