Editor's Note: The following analyses are based on sample data collected in specific bankruptcy courts in the fourth circuit from 1990 through 1996 by Central Data Technologies, Inc. (CDT), a proprietary research and database company. CDT gathered all data in this study from the public records in the clerks' offices of various bankruptcy courts; therefore, the data is subject to the accuracy of the persons and/or entities that provided and recorded it.
Bankruptcy laws and procedures exist to provide an orderly environment in which to determine the most equitable solution for all concerned to the immediate and evolving financial difficulties facing the debtor. However, although the law and the intent are always the same, one study shows that a variety of factors may affect the results. Notable distinctions between the outcomes of individual bankruptcy cases could be of critical importance to creditors as they evaluate their position with a bankrupt customer.
Difference, Among Courts
Debtors are subject to certain restrictions when choosing a court in which to file their bankruptcy petition. However, if a choice is possible they may want to consider the significant differences that exist between the outcomes in individual courts. The outcomes of cases filed in five federal bankruptcy courts located in the Mid-Atlantic region were analyzed to determine what percent of Chapter 11 cases filed actually culminate in a confirmed plan. According to the data (Chart 1), the federal bankruptcy court in Greenbelt, MB, has the highest percentage of confirmed cases filed--27 percent--resulting in a confirmed plan. The federal bankruptcy court in Washington, DC ranked last with only 17 percent of the cases filed resulting in a confirmed plan. Creditors may want to take note of this percentage as they consider the probability of a debtor's emergence from bankruptcy in each of the individual courts.
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Debtors and creditors should also consider the likelihood of dismissal in an individual court. When compared to other courts in the region (Chart 2), the federal bankruptcy court in Alexandria has an unusually high percentage of dismissed cases. Yet, a survey of bankruptcy practitioners in Northern Virginia did not reveal a specific cause for the prevalence of dismissed cases in Alexandria. A dismissed case, however, may open the door for unsecured creditors to obtain payment once the debtor has lost the protection of the court.
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Differences Among Judges
The percentage of Chapter 11 cases resulting in confirmed plans varied greatly when broken down by the individual judges. Among nine judges, the ratio of confirmed Chapter 11 cases ranged from 13 percent to 31 percent.
The time required to obtain a confirmed plan is of equal importance to creditors and debtors. …