America's bankruptcy system has been one of the U.S. economy's competitive strengths: A failing business should get a shot at a fresh start. Too often, however, bankrupt companies get trapped in court for years, paying a fortune in fees while competitors flourish at their expense, according to an editorial in yesterday’s Chicago Tribune. In a report unveiled this month, the American Bankruptcy Institute's Commission to Study the Reform of Chapter 11 recommends an overhaul of the law. Among some of the commission’s suggestions are improving bankruptcy for small businesses by eliminating the automatic appointment of unsecured creditors committees. These committees use a bankrupt company's money to hire lawyers and advisers who supposedly ensure that the interests of all creditors get taken into account. But the majority of companies filing for chapter 11 have less than $1 million in annual revenues and can ill-afford the administrative burden. Doing away with the committees in at least some cases sounds to the Tribune like a smart idea. The report also says that attorneys for cash-strapped companies should forgo hourly billing rates and instead work for fixed fees or contingent fees — giving lawyers an incentive to wrap up cases.
http://www.chicagotribune.com/news/opinion/editorials/ct-edit-bankruptc…
To read the full report of ABI’s Chapter 11 Reform Commission, please click here: http://commission.abi.org