New Senate bill would force bankruptcy filings closer to home
Warren and Cornyn argue that their bill would prevent businesses from “forum shopping” and would allow employees, retirees, and creditors to more fully participate in the bankruptcy process.
Delaware and the Southern District of New York have long been the preferred forums for large Chapter 11 cases. Since 2008, approximately 65 percent of all bankruptcy filings of publicly traded companies were filed in Delaware or the Southern District of New York. Those jurisdictions are known for having judges with extensive experience handling complex Chapter 11 cases who follow well-established case law that oftentimes favors businesses.
For obvious reasons, Delaware’s governor and congressional delegation have voiced strong opposition to the proposed law. They issued a joint statement maintaining that the new bill “is a misguided policy” and that denying companies “the ability to file for bankruptcy in the courts of their choice would not only hurt Delaware’s economy but also hurt businesses of all sizes and the national economy as a whole.”
It is too early to tell whether the bipartisan Senate bill will receive the broad support necessary to pass through Congress. However, if the bill gains steam and appears headed for approval, expect a flurry of bankruptcy filings in Delaware and the Southern District of New York just prior to the new law going effective.