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12 Am. Bankr. Inst. L. Rev. 69 (2004)
The New Face of Chapter 11

handle is hein.journals/abilr12 and id is 83 raw text is: THE NEW FACE OF CHAPTER 11 DOUGLAS G. BAIRD* Chapter 11 today lives in three different worlds. The first world is that of the large corporation. Each year, several dozen corporations with hundreds of millions in assets enter the bankruptcy system in Wilmington, New York, and a handful of other places. A single Enron or Worldcom generates more legal work than a thousand small cases combined. Many reorganization lawyers see only these cases. The second world is that of the small business chapter 11. The vast majority of the 10,000 corporate reorganizations filed each year are of small businesses. The electrical subcontractor, the small family-run Italian restaurant, or the suburban jewelry store falls behind on payments to the IRS, landlords, workers, and suppliers and tries to sort out the mess in bankruptcy court. Most bankruptcy judges never see any other kind of corporate chapter 11. Living largely apart from these two worlds is the one found in the Federal Reporter and United States Reports. The courts of appeal and the Supreme Court generate a regular flow of authoritative interpretations of the Bankruptcy Code, often focusing on its language, separate from its history or the practices that have taken deep root in large and small cases over the last 25 years. In this paper, I explore these brave, new worlds and assess both the present and the future of chapter 11. The first two parts look at the world of large and small chapter 1 Is respectively. In the last part, I focus on what is likely to happen when formal bankruptcy law loses touch with bankruptcy practice. I. THE LARGE CORPORATE CHAPTER 11 TODAY In December 2002, the bankruptcy court in Delaware confirmed Global Crossing's plan of reorganization. One of the largest corporations ever to go through chapter 11, Global Crossing is emblematic of chapter I Is past and its future. Global Crossing was formed in 1997 to close one of the last gaps in the Internet. The telecommunications cables connecting the continents were too small Harry A. Bigelow Distinguished Service Professor, University of Chicago Law School. The ideas in this paper and the empirical work that supports them grow out of continuing collaborations with my colleagues Edward Morrison and Robert Rasmussen, to whom I am most indebted. Lynn LoPucki gratiously let me use his databases. Susan Sonderby and Eugene Wedoff helped by providing access to data on small business bankruptcies in the Northern District of Illinois. I also thank Bethany Hollister for research assistance, as well as Visa, U.S.A., Inc., Verizon, Microsoft Corporation, the Sarah Scaife Foundation, and the Lynde and Harry Bradley Foundation. 1 See James S. Granelli, Court Oks Global's Plan to Wipe Out Obligations, L.A. TIMES, Dec. 18, 2002, pt. 3, at I (explaining court approved elimination of Global Crossing's debt at pennies on dollar); Technology Briefing Communications: Global Crossing Reorganization Approved, N.Y. TIMES, Dec. 18, 2002, at C4 (announcing federal bankruptcy judge approved Global Crossing's reorganization plans); see also In re Global Crossing, 295 B.R. 726, 730 (Bankr. S.D.N.Y. 2003) (stating court approved purchase agreement on Aug. 9, 2002, which was basis for reorganization plan eventually confirmed by debtors).

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