October 8, 2005

Bankruptcy Law: Troubled companies race to beat deadline

Financially struggling companies are under pressure to file for bankruptcy within the next 10 days, before significant changes in the nation\'s bankruptcy laws take effect - sweeping revisions that will limit the amount of money a company can pay top managers, make it harder to wipe out debts for pennies on the dollar and provide outsiders a better chance to propose their own plan for restructuring a bankrupt firm. Companies already considering bankruptcy don\'t want to deal with the changes, said Laura Bartell, a bankruptcy law professor at Wayne State University . \"Everybody is much more comfortable with the devil they know than with the devil they don\'t know,\" Bartell said. But, even if the new rules create a short-term increase in filings to beat the deadline, experts agree the law won\'t encourage or discourage bankruptcies in the long run. The law doesn\'t cause people to file for bankruptcy, Bartell said. \"It depends on what the economy does. What creates bankruptcies is economic problems either for the individual company or the economy as a whole.\"

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