Business Bankruptcies Rise 20% in 3rd Quarter

Business bankruptcies rose almost 20% at the busiest U.S. courts last quarter as companies such as Delphi Corp. and Northwest Airlines Inc. sought protection from creditors before a new law will force them to accelerate reorganization plans.

“Anybody that is thinking about filing a bankruptcy case would be crazy not to take advantage of the old law,” said Kenneth Klee, a partner at Klee Tuchin Bogdanoff & Stern in Los Angeles who teaches business bankruptcy at UCLA Law School.

Starting Oct. 17, companies will be limited to 18 months to fashion reorganization plans. The law, signed in April by President Bush, also will cap compensation designed to keep executives from leaving and limit to 210 days the time companies have to reject real estate leases.

Business bankruptcy filings since July 1 were 19.5% higher than in the previous three months, according to data compiled on 30 of the 85 U.S. courts that supervise reorganizations and liquidations. The period included the September bankruptcies of Northwest Airlines Corp. and Delta Air Lines Inc. and the filing Saturday by auto-parts maker Delphi.

From July 1 through Oct. 4, 546 companies seeking to reorganize filed for bankruptcy protection in 30 U.S. courts, including New York, Wilmington, Del., Chicago, Houston, and Detroit -- among the most popular business jurisdictions. From April 1 to June 30, 457 businesses filed for protection in those same courts, according to data compiled by Bloomberg.

The Administrative Office of the U.S. Courts has no statistics yet for the same period.