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The Bankruptcy StrategistKickerFeaturesSectionsNewsLJN Newsletters

From Cradle to Grave

By Shelly Rothschild

Bankruptcy lawyers may not get involved in their clients' transactions until it is too late. They may be called in only upon the occurrence of a default, litigation, or the commencement of a bankruptcy case. At that point, they are faced with deals that have been “set in stone” — drafted and structured by lawyers specializing in the front-end, who may have looked at the transaction from an overly optimistic viewpoint, especially in the case of a long-term deal with another party that presently is in good financial health.

The clients' focus at the outset of a transaction is on making sure that the deal gets done and that their business points are addressed. Unfortunately, as a result, when disaster subsequently hits, their bankruptcy lawyers may be faced with litigating and enforcing contracts that may fail to address or define defaults, remedies, ownership, security interests, attorneys' fees and bankruptcy, except for unenforceable ipso facto clauses. At that point, there may be little a bankruptcy lawyer can do to protect a client that is relying on a contract that leaves out key terms; is riddled with ambiguities that can be construed in the opponent's favor; or fails to incorporate any strategies for protecting the client from the risk of default, litigation and bankruptcy.

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