New federal law adds restrictions

Whether they are small retail stores or major publicly traded corporations, businesses will face more restrictions when the new bankruptcy law goes into effect Oct. 17.

The tougher law was one factor that analysts said Delta Air Lines and Northwest Airlines considered before filing for Chapter 11 protection from their creditors last month, before the law's effective date.

Business bankruptcies have actually been falling in recent years amid an improving economy and dropped in 2004 to their lowest level in more than two decades. Although they were up 6 percent in the second quarter of 2005 from the same period a year earlier, corporate filings are on track to decline again for the year as a whole, according to figures from the American Bankruptcy Institute.

In South Florida, business bankruptcy filings fell to 308 from 360 -- a 14 percent decline -- through August compared to the same period in 2004. September figures have yet to be released... (more)

REORGANIZATOIN WOES

Still, the companies that do seek protection as of Oct. 17 will have a rougher time in reorganization, something many still hope to avoid.

''I think there will be an increase in bankruptcy filings in advance of the deadline,'' said Samuel Gerdano, executive director of the ABI. ``Some might be advised that it's better to deal with the devil they know than risk the uncertainty that comes with the new law.''

Miami lawyer Howard Berlin doesn't expect the impending changes to cause businesses to rush into bankruptcy court like consumers have been doing.

''I don't believe that corporate America is focused on Oct. 17th as a material issue,'' said Berlin, a partner in Miami's Klugler, Peretz, Kaplan & Berlin.

Nevertheless, one of the biggest changes in the business provisions of the law is a new limit on what's known as the exclusivity period, the 18-month span during which a company in Chapter 11 has the sole right to propose a reorganization plan. Under the old law, companies could have unlimited extensions of the exclusivity period; they lose that right under the new law.... (more)