Wilmington firms saw 2020 bankruptcy boom, and they may again
WILMINGTON – Although COVID-19 wrought widespread financial pain for many businesses across the country and the world, it conversely led to a boom in filings for Wilmington’s many law firms.
As the center for most of corporate America, the city’s legal scene has long depended on a tripod of business services, bankruptcy and intellectual property. Wilmington’s state Court of Chancery and federal Bankruptcy Court and District Court typically rank among the busiest courthouses in the country as high-profile business cases are heard.
Few likely expected the explosion of bankruptcy filings that occurred last year, though.
The Delaware court’s commercial Chapter 11 filings, or businesses looking to restructure debt rather than sell their assets, grew from 613 in 2019 to 1,666 last year, by far the most of any federal bankruptcy court. It also saw its share of so-called “mega cases,” or those that involve at least $100 million or 1,000 creditors, grow to a record-high of 98 last year.
Those dramatic increases in cases also led to the highest weighted caseload for the court’s judges at 2,912 last year – the national average was 618. Helping to shoulder that burden, two new federal bankruptcy judges – J. Kate Stickles and Craig Goldblatt – were added to the bench in April, filling vacancies left in recent years.
The filings have slowed in the first half of 2021, with 381 commercial Chapter 11s filed in Delaware, but it still ranks second overall in the nation behind the rapidly growing Southern District of Texas court.
Warren Martin Jr., co-chair of Porzio, Bromberg & Newman’s bankruptcy and financial restructuring practice that opened a Wilmington office last summer amid the case surge, said he believed another surge of cases may somewhat counterintuitively come as the economy picks back up.
“You don’t want to file for bankruptcy when you’re sliding down into the abyss, because to get out of bankruptcy you want to have a plan to pay your creditors. If things are getting worse, it’s not a very good time to try to convince the court and the creditors,” he said, noting the pandemic likely gave cover to many at-risk companies last year to restructure their debt.
Martin said that his firm is currently seeing bankruptcy cases filed for health care entities, mining and metal companies, and traditional retailers, among other industries. Porzio expects to hire more attorneys in Wilmington to help with a growing caseload, he added.