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Cost-cutting bankruptcy guidelines expected by July 1

Bankruptcy judges and the U.S. Trustee Program seek to control expenses billed by attorneys

No company ever wants to face bankruptcy, but new guidelines expected by July 1 aim to lower costs for companies when the worst happens.

Bankruptcy judges, along with the U.S. Trustee Program (the bankruptcy-monitoring wing of the Department of Justice) intend the guidelines—the first bankruptcy cost-checking initiative in about 17 years—to limit attorneys’ and creditors’ fee and expense applications.

The expertise of a bankruptcy professional doesn’t come cheap. Some have hourly rates of as much as $1,000, and they typically get paid before creditors do, the Wall Street Journal reports. When you add to that the costs of hotels, flights and meals often billed by bankruptcy professionals, it causes concern that these professionals are taking money away from the estates’ creditors, to whom it rightfully belongs. For example, during law firm Dewey & LeBoeuf’s famous bankruptcy, a U.S. trustee questioned restructuring firm Development Specialists Inc.’s bill for two $575/night stays at the Waldorf Astoria New York hotel.

The guidelines intend to curb such practices a bit, with proposals such as prorating expenses and not charging for “overhead”—things like phone calls and word processing. The guidelines are expected to apply to attorneys working on bankruptcy cases with $50 million or more in assets or liabilities.

 

Read more about bankruptcy on InsideCounsel:

Electric-car maker Coda files for Chapter 11 bankruptcy

Kodak to sell two businesses to UK retirees

Former Dewey & LeBoeuf chairman agrees to settle mismanagement claims

MF Global’s bankruptcy trustee sues company’s former CEO

American Airlines files plan to exit bankruptcy

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