Recent Changes Affect Corporate Bankruptcy

As of November 17, 2005, the U.S. Congress modified Chapter 11 bankruptcy regulations. One of the major changes is the time period within which a business must have its reorganization plan confirmed by the bankruptcy court. In the past, the “requirement” specified a shorter time, but bankruptcy court judges routinely granted more time, often much more time to file the plan. Former creditors have heavily criticized this practice for obvious reasons and competitors have also filed numerous complaints, stating that this gives competing companies a strong advantage in the fight for consumer dollars. Another change attempts to close the door for companies formerly using Chapter 11 to force employee or union cost cutting concessions, to gain a competitive edge, or to simply build up their cash position. New regulations require companies to justify every portion of their reorganization plan in light of their claim that they can no longer operate without bankruptcy protection.