Enron Corp, Global Crossing Ltd and Polaroid Corp may have hurt their chances to emerge successfully from bankruptcy by filing for protection from creditors in New York and Delaware, a study suggests.
Half the companies that file for bankruptcy in Delaware go out of business, are acquired or go bankrupt again, the study said. About a third suffer the same fate after filing in Manhattan, compared with a national failure rate of 14 percent.
One reason for the disparity may be a tendency of Delaware and New York judges to duck tough decisions necessary to put a company back on its feet, the study found. The judges are "more willing to let the financial advisers and lawyers make all of the decisions," said Lynn LoPucki, a University of California at Los Angeles law professor and author of the study.
Bankruptcy cases in the US are continuing at a record pace, prompted in part by the recession that began in March 2001.
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