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Hard times boost NJ bankruptcy claims, prompt forum shopping

Photo Credit: Cliffview Pilot

Bankruptcy filings are up by a third in New Jersey, at the same time that the number of reorganization petitions is dropping, a published report says.

Meanwhile, Chapter 11 filings in U.S. Bankruptcy Court in New Jersey fell to 369, a 10-percent drop from the 412 in the same period in 2008, the Administrative Office of the Courts reported.

“At the same time, New Jersey experienced a 37 percent increase in all business and personal bankruptcy filings [to] 29,000, which outpaced the national increase of 33 percent to 1.2 million filings,” the New Jersey Law Journal wrote.

Although the economic climate explains the jump in total findings, it’s not as easy to pin the cause of the drop in business Chapter 11s.

“The main reason appears to be the flight of cases to other districts,” the Journal reports.

“Practitioners say that companies and large national firms that represent them prefer the Southern District of New York, where many of these lawyers are comfortable and where pro hac vice admission requests are freely granted.”

Delaware, as well, “has long been viewed as a forum sympathetic to corporations.”

The publication has figures to back it up:

“The 452 business Chapter 11s in Wilmington, Del. in the year ending March 31 represented an increase of 76 percent and the number in Manhattan jumped by 87 percent to 823. Even Philadelphia, which has traditionally been dwarfed by Wilmington as a Chapter 11 forum showed a 62 percent increase, to 125.”

“There is a lot of forum shopping,” Stephen Packman of Archer & Greiner told the Journal.

Finding banks willing to provide the necessary financing for a Chapter 11 filing has become more difficult, lawyers say. It’s especially true for those companies in New Jersey that report $10 million to $20 million in revenue category. They can’t afford the expense of a Chapter 11.

For them, the only alternative is to close shop.

Of course, a bit of perspective helps: In reviewing the numbers natonwide, the Law Journal found that New Jersey’s 37 percent increase in total filings over the year ending March 2008 was the 23rd-largest among the 94 federal districts, “but nowhere near the 92-percent increase in central California, tops in the nation.”

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