Lessons for Death
7. Accept that the process will make lawyers a lot of money.
Depending on the size of the company filing for Chapter 11, the process will be expensive. There will be a pre-approved budget with about a dozen line items of expenses going to professionals (consultants and lawyers) to administer the bankruptcy. You will be very upset to see huge amounts of dollars going to people who really will not improve the value of the company. Your unsecured creditors (generally trade suppliers) will be even more upset because they wish that money would come to pay their bills. The professionals in a bankruptcy are there to protect the existing value and account and monitor the sale of assets and repayment of debts. It’s not a feeding frenzy; it’s more like trying to split up the carcass in an organized manner amongst people who really don’t want to get along. There is only so much money to go around so everyone is fighting to get the most they can. The judge is there to try to make sure it is ostensibly a fair fight. But the judge is someone who is trained in law, not in business, so it might not always be fair from a business perspective.
For example, in bankruptcy the professionals record their time in increments of 10 minutes. Somewhere, somehow, someone thought this would be a good way to control the hours being billed. In reality, it takes everyone a lot longer to record an entire week’s worth of work if they are jotting down every 10 minutes of their “value.” Best of all, in bankruptcy, professionals are legally permitted to charge for the time it takes to assemble their bill each week. So, they make the process cumbersome, then they let you charge the estate for the time it takes to go through that complexity. Imagine getting paid to fill out your timesheet each week?
Task: Go for a walk, go to church, go have a drink. You can’t change the law or the practice so let it all go. It’s up to the trustee and the judge to keep everyone fair and honest at this point. The fees for the professionals are all pre-approved by the DIP lenders. If they agree to fund them in advance, it’s their money, not yours. If they are excessive, the Unsecured Creditors’ Committee will fight as much as they can to get more fees cut so they can have more money to recoup on their outstanding invoices.