Who’s To Blame for Chapter 22s? The Examiners Weigh In

This week, the Examiners will take on a not-infrequent occurrence in the restructuring world: the filing of so-called Chapter 22s, or companies that seek Chapter 11 protection a second time.

Chapter 11 gives companies the breathing room and the tools to make such survival-strengthening changes as reducing their debts, getting out of unwieldy contracts or finding a buyer to take over operations. To exit Chapter 11, a bankruptcy judge must find that the restructuring plan a company negotiated with its creditors is, among other things, feasible and in creditors’ best interests.

But that doesn’t mean Chapter 11 always solves the problem. Problems can develop after a company exits bankruptcy, or perhaps its restructuring didn’t trim enough debt or address other issues. We’ve seen a good number of Chapter 22s, as well as some Chapter 33s, 44s and at least one Chapter 55, in recent years, filed by the likes of Atlantic City, N.J., casino operators (Trump Entertainment, Revel), publisher Reader’s Digest, baked-goods purveyor Hostess and discount retailer Filene’s Basement.

These companies certainly won’t be the last to make a return trip to bankruptcy, so we’ve asked Bankruptcy Beat’s panel of restructuring experts to answer this question:

When a company files for Chapter 11 protection a second, third or even fourth time, who’s to blame?

We’ll be posting responses throughout the week. In the meantime, please feel free to share your views in the comments section.

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