Bankruptcy counseling—referred to by one attorney as “an industry in consolidation”—has always been a cyclical business, but the steady, years-long decline in new cases has required lawyers to rethink their practices to some extent.
It’s not an issue limited to the region. For the yearlong period ending March 31, filings in federal bankruptcy courts nationwide tumbled by 12.3 percent after falling 11.3 percent the prior year, according to a Administrative Office of the U.S. Courts database.
More recently, an April 30 report about law firm business by Thomson Reuters claimed a 7 percent dip in demand for bankruptcy services in the first quarter of 2015.
Joseph Lubertazzi Jr., a senior partner in McCarter & English’s bankruptcy and restructuring practice group and a member of the Newark firm’s executive committee, said, “This is not New Jersey; this is widespread. If you’re what I call a bankruptcy purist, a lot of people are not busy. … A lot of people across the board [are] wondering where it’s going.”
McCarter & English’s group has between 25 and 30 people, according to Lubertazzi, who estimated that 90 percent of work is on the creditor side.
In his own practice, Lubertazzi said he’s currently at work on four or five large creditor-side matters, but several months ago, there were only one or two active files.
Lawyers in the group have picked up the slack by handling workouts, litigation and other areas of client need, he said.
“If you’re doing bankruptcy work, you have to look at who the client base is,” he said. “If you’re doing debtor work … you’re really marketing your reputation,” because most companies don’t go into bankruptcy more than once.
On the other side of the coin, institutional clients—namely banks and other lenders—tend to be loyal and routinely funnel other tasks or types of work to the firm, according to Lubertazzi.
Picking up that slack has kept business steady: Revenue strictly from bankruptcy work is down, but practice group revenue is not, Lubertazzi said.
“On a billable hour basis, we are fully engaged,” he added. “So it’s not like I have people sitting around, but they may be doing some non-bankruptcy work. … Considering what is happening to some other firms, we’re happy.”