Number One Reason to Avoid Taking a Chapter 11

Put aside inexperience:  the most important reason not to take on a Chapter 11 is that it can kill your practice.

The rules and procedures for Chapter 11 were created for the debtor “big boys”, the corporations that hire tall-building lawyers by the score.  There are innumerable hoops to jump through, even if you were familiar with each hoop and had a template for the exercise.  The  shear number of tasks will consume your days, and nights, and those of any staff you may have.

Your existing clients will get short shrift.  You will exhaust the retainer in a couple of weeks, and will face a DIP with no cash to pay you and a bench unaccustomed to approving fees so you can meet payroll or pay rent. It may be hard to withdraw from the case and you’re stuck as counsel of record til the end.

Best case, you end up with one pleased client at the end of the exercise to sing your praises to others.  Far more likely, the case craters, you end up with a bill that will be discharged in the Chapter 7, and the skills that you have garnered along the way are not immediately applicable to the run of the mill consumer or small business bankruptcy case.

The last statistics I saw said 9 out of 10 Chapter 11 cases fail.  If you are following this site, as a relatively inexperienced lawyer, you don’t want to take on an 11 and fail as well.

My thought is to devote yourself to cases where you can spread your financial fortunes among a number of cases.  Some will fail, some will be less profitable, but you haven’t bet the farm on a single case.  You develop skills, templates, procedures and sensibilities that are immediately useful in the next case you take on.  You produce a number of satisfied clients whose post bankruptcy needs you can address and who can say kind things to others about the service they got from you.

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  1. http://Michael2255 says

    That’s why I require a 30K retainer. Haven’t gotten it yet!