The results of a ground-breaking study funded by the American Bankruptcy Institute Endowment Fund revealed that numerous factors, such as the presence of creditors’ committees, influenced the total professional costs of chapter 11 bankruptcy cases. While previous studies have primarily focused on a company’s asset size, number of firms involved in the case and the duration of the proceeding as the primary factors influencing the total cost of professional fees, study reporter Stephen J. Lubben, Daniel J. Moore Professor of Law at Seton Hall University School of Law, looked at numerous factors in examining more than 1,000 chapter 11 bankruptcy cases that were filed in 2004.
Previous studies of professional fees in chapter 11 cases over the past 20 years had examined significantly smaller sample sizes, ranging from nearly 25-75 cases. These studies primarily evaluated asset size, number of professionals and duration of the proceeding as the primary factors in determining the costs of professional fees in chapter 11 cases. Taking those previous studies into account, Prof. Lubben’s research incorporated regression models that found the addition of other variables, such as looking at a bankrupt firm’s assets and debts, presence of official committees and whether there were “first-day motions” filed in a case, to be better predictors of the costs involved in a chapter 11 case.
Find out more from the study’s primary researcher and leading experts as they discuss the results and implications of the chapter 11 professional fee study.
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