Who Do I Want As My Client?
Corporate debtor representation affords the bankruptcy practitioner the most diverse and sophisticated experience in the bankruptcy world. Debtor counsel is involved with every aspect of the proceeding, from the initial consultation as the debtor enters choppy waters to effecting the plan of reorganization post-confirmation, and every event in between. In many ways, you will be de facto corporate counsel for the duration of the proceeding, and you will wear every hat discussed in this guide. In a Chapter 11 proceeding, debtor's counsel "serves as the legal quarterback for the rest of the team," says Bryan Cave LLP's Gregory Willard. It's an exciting practice, to say the least. No other type of representation gives the newbie attorney such an excellent and varied education in bankruptcy. And practitioners often get personally` invested in the case, given how closely they work with the debtor. As debtor's counsel, "you get to know people very well and work very closely with them," says New York City-based James Bromley, "and you can help other peoples way of life." On the flip side, though, it's not always easy watching these new friends get laid-off as the debtor winds down its business. The other big downside of this intense engagement, of course, is its time demands, particularly towards the beginning of the case, when debtor's counsel is notoriously swamped underneath piles of motions and schedules. "It is a marathon to get everything done" before the first day of the case, says Roger Friedman, noting that once the case begins, every day "can be a fire drill" with more-than-occasional emergencies. But for many, debtor representation is what bankruptcy is all about.
Committee representation is a unique experience, given the politics and dynamics of each committee. Some committees are a close-knit, friendly group; more often, they have their own sets of tensions, with committee meetings nearly resembling boxing rings at particularly tense points. Committees often break up into factions -- trade creditors vs. bondholders vs. union leaders.
The diversity of each committee makes committee representation lively and interesting. Committee counsel often get to play the role of Greek chorus, always commenting and negotiating most big issues on behalf of the creditor body, without the heavy lifting of debtor's counsel. Negotiation of DIP financing provides a good example. Debtor and secured lenders draft and negotiate the entirety of the credit agreement. Committee counsel, by contrast, can focus on fighting over specific issues, marching into the DIP financing hearing clear-eyed after Debtor and secured lenders' counsel have been up the whole night completing the documents.
This is not to say that committee counsel doesn't work hard; the committee is the only client aside from the debtor that is always involved with the bankruptcy from beginning to end, affording committee counsel a similar top-to-bottom perspective. In many cases, committee counsel picks up the oar and handles matters for the debtor, such as sponsoring and drafting the plan of reorganization and disclosure statement. In all, though, committee representation offers a more sedate and balanced quality of life debtor representation.
The downsides can be the headaches of dealing with a contentious committee and the repetitive work, such as sending endless faxes and reports to committee members, updating them as to the progress of the proceeding. Committee representation is also "more reactive than proactive," notes Shari Siegel, with committee counsel primarily reacting to others' motions and debtor actions. But for many, it provides an ideal balance between the excitement and intensity of being in the center of the action and the calmer lifestyle of non-debtor work.
Banks are often perceived as the bad guys in the case -- the 800-pound gorilla, the Goliath to the unsecureds' Davids. Lenders, whether pre-petition or post-petition, hold the debtor's purse strings, and can often be tough enforcing their interests. This makes sense; the bank usually has the most to lose in bankruptcy. When a debtor lays off half its workforce, it is often at the demand of the banks, who realize that such layoffs are the only path to reorganization. Bank representation is probably the most "corporate" of any type of bankruptcy practice, for better or for worse. This commentary is not a knock on bank representation -- it's simply the reality.
Bank representation has many benefits -- tremendous involvement in the case, akin to (and sometimes more than) that of the committee; a client with tremendous leverage; and much of the intensity and excitement of debtor representation, given that the debtor is essentially playing with the banks' money. In many ways, the bank is the primary party in interest in the proceeding; "banks file cases, not debtors," observes Ben Becker. Its the secured lenders who usually require the bankruptcy, and who have tremendous leverage, at least at first, in the proceedings. And another advantage of bank representation is the absence of fee applications!
Bank representation also has its own unique trajectory. Pre-petition lenders are invariably and intensely involved at the beginning of the case, given the size of their interests. The DIP lenders are typically even more involved, negotiating and supervising the use of DIP financing.
Often, however, the banks fade to black at some point in the proceedings, typically when they, as secured creditors, are guaranteed a 100% return on their investment. The banks' sole interest is money; once they are assured that they will get it all back, they often lower their profile considerably. It's a different trajectory -- whereas a debtor follows a long and bumpy road, and the committee often an equally long but quieter road, the bank starts off at 90 m.p.h. and, somewhere along the way, slams on its brakes.
Like committee representation, counseling banks offers the practitioner the chance to be at the front lines of the bankruptcy case without all of the debtor's administrative work. In addition, you have the luxury of advocating for the interests of a single client with concrete goals, and often get to dodge out before the case lingers on for too long. On the downside, you better enjoy drafting financing agreements, and you better like playing the heavy, often the role of the banks in bankruptcy.
Representing individual creditors
Representing an individual creditor (aside from a bank) is a whole 'nother ball game. You have the most narrow focus in the case -- protecting your solitary client, who can be anyone from a bondholder to the nut store down the street. Generally, the individual creditor counsel only pops into the case when his client is directly impacted by a given event -- to file his proof of claim form, or, more controversially, to dispute the debtor's estimation of his claim or defend an avoidance action. And if your unsecured client is on the committee, you might also attend committee meetings to voice your client's two cents, essentially functioning as a thorn on the side of the thorn on the side.
Some individual creditors do get more involved in the case, either on their own or as a particularly influential member of the committee. But, by and large, individual creditors jump in and out of the case for limited purposes. For many individual creditors with limited claims, greater involvement isn't worth the expense. They leave the heavy lifting -- the broad disputes about the plan of reorganization, the assessment of the proposed sale of the debtor's business -- to the committee.
Many attorneys specialize in working for these individual creditors -- small trade creditors, the little people. These are often smaller, volume-based (relatively speaking) practices, focusing on bankruptcy litigation. And while an individual creditor practice is often intense, it generally has a better work-life balance than the all-immersive world of debtor representation. The work is often somewhat repetitive, focusing on a few narrow areas -- avoidance actions, claims disputes and the like. Representation of trade creditors often involves a lot of explaining and justifying the bankruptcy process, given many trade creditors' limited experience in -- and frustration towards -- the bankruptcy system. But for the practitioner looking for a "smaller," more even-keeled practice, individual creditor representation might be right.
Other parties of interest
Some particular creditors combine different aspects of the above practices. Representing an indenture trustee, deputized with protecting the interests of disparate bondholders, affords the practitioner a combination of the coalition-building of committee work and relatively limited agenda of individual creditor work. Representation of a single institutional unsecured client, like a bank holding a very large bond position, is a major in single unsecured creditor work with a minor in bank work; your client is just another unsecured creditor, except it is a bank with a single financial focus and substantial leverage among the unsecureds. Union representation is its own unique ball of wax. And many practitioners include in their practice representation of acquirers, parties who purchase bankruptcy assets, which offers a unique combination of litigation and m&a work. Like the substantive work, the client base in bankruptcy is full of variety, with each type of representation posing its own challenges.
Chapter 7 Trustees
Chapter 7 trusteeships are the refuge of lawyers who really want to be businessmen. A bankruptcy trustee is a court-appointed fiduciary, often an attorney, charged with winding down the business of the Chapter 7 debtor and distributing its assets. Many attorneys devote a substantial portion of their practice to serving as, or representing, a Chapter 7 Trustee. Abiding by the maxim that only a fool hires himself as his lawyer, most Chapter 7 Trustees retain outside counsel, or other attorneys in their firms, to handle the legal work.
To be a Chapter 7 Trustee, you must first be appointed to your region's sitting trustee panel by the Office of the United States Trustee. Then, at the commencement of each Chapter 7 case, the U.S. Trustee's office selects a member of this panel to serve as Chapter 7 Trustee. Appropriately, appointment to one's local Chapter 7 panel can open the door to a steady stream of trustee work. Although trustees are a hallmark of Chapter 7 proceedings, they are also sometimes appointed in Chapter 11 proceedings involving liquidations of the debtor's entire business. Many practitioners enjoy serving as Chapter 7 trustees; while you are still primarily an attorney, you get to play quasi-businessman. "If the business is a restaurant, you get to play restaurateur," albeit one closing down its business, notes Leonard Pena of Los Angeles bankruptcy boutique Weinstein, Eisen, Weiss & Rothschild LLP. Many practitioners also find representation of Chapter 7 Trustees satisfying from a legal standpoint. Aram Ordubegian, also of Weinstein, Eisen, Weiss & Rothschild LLP, describes Chapter 7 representation as "raw bankruptcy work," focused on quickly wrapping up the estate, maximizing its value through avoidance actions, and slicing up the pie to creditors. Trustee representation also affords practitioners the benefit of a savvy client with substantial bankruptcy experience in and knowledge, and no other interest besides maximizing the value of the estate and creditor returns.
On the downside are the administrative responsibilities of the position, including the filing of endless reports with the court, which can grow tedious. Nonetheless, for many practitioners, the opportunity to play fiduciary and businessman is an exciting change-of-pace.