The Delaware Phenomenon
By: Russell L. Munsch (Co-author) and Jay H. Ong (Co-author) During the last several years, the District of Delaware has received considerable attention and developed a reputation as the hotbed of corporate bankruptcy filings. Until recently, there has been much debate over whether this popularity is symptomatic of some defect of the bankruptcy system or merely the result of various benign factors. In light of the assertion of forum shopping often associated with Delaware filings over the last 10 years, one might wonder why these issues have escaped notice during this current period of impending bankruptcy reform, which has instead focused primarily upon consumer filings. The "problem" of Delaware's excessive attractiveness to large corporations considering Chapter 11 may be beginning to resolve itself. In other words, regardless of whether Delaware's popularity can be beneficial for the system, recent developments remind us of that old saying, that it's quite possible to have too much of a good thing. Delaware's bankruptcy preeminence extends only to corporate filings. Nationally, consumer filings constitute the vast majority of bankruptcy filings, and some jurisdictions do report more total business filings per year than Delaware. All federal jurisdictions report business filing percentages, compared to consumer filings, at only 10%, with none exceeding 20%, except Delaware. In 1999, Delaware boasted a staggering ratio of almost 50% business filings. The disparity is even more pronounced when one focuses only on large corporate bankruptcies. TO READ MORE, CLICK THE PDF ICON BELOW: View as PDF |