Bankruptcy filings in New Jersey have seen a significant increase in the past year, prompting discussions about the reasons behind this trend. Experts believe that the state’s deep pool of experienced bankruptcy judges and its reputation as a debtor-friendly venue could be contributing factors.
Corporate bankruptcy filings in the District of New Jersey have doubled in the past year, with notable cases such as WeWork, Rite Aid, Bed Bath & Beyond, and David’s Bridal. The number of companies with funded debt over $10 million opting to file for bankruptcy in New Jersey rose from four in 2022 to eight in 2023.
While some may assume that companies file for bankruptcy in the location where they are based, this isn’t always the case. Several New Jersey-based companies, like ToysRUs, have strategically chosen not to file in the state. It is well-known that large companies often choose venues that offer strategic advantages. Therefore, the increase in bankruptcy filings in New Jersey is likely due to more than just proximity.
Experts suggest that the availability of experienced bankruptcy judges in New Jersey is a significant factor in attracting bankruptcy filings. Bankruptcy practitioners value predictability and consistency, and filing cases in jurisdictions with knowledgeable judges can provide these assurances. Attorneys aim to achieve specific results when it comes to significant issues in Chapter 11 cases, such as the payment of pre-petition debt by debtor-in-possession lenders, stub rent, and third-party releases.
The Third Circuit, which includes New Jersey, is perceived as a debtor-friendly venue for third-party releases, unlike New York where it is viewed more critically. This distinction, along with other factors such as the recent resignation of Judge Jones from the Southern District of Texas, contributes to the appeal of New Jersey as a bankruptcy filing destination.
Judge Kaplan, a leading figure in the New Jersey bankruptcy court, has been vocal about the state’s debtor-friendly environment. Consequently, experts anticipate that the number of bankruptcy filings in New Jersey will continue to rise in the future.
In conclusion, the surge in bankruptcy filings in New Jersey can be attributed to various factors. These include the presence of experienced bankruptcy judges, the reputation of New Jersey as a debtor-friendly venue, and the strategic considerations of companies filing for bankruptcy. As the landscape of bankruptcy law continues to evolve, practitioners and debtors alike are carefully considering the jurisdiction that best aligns with their interests and desired outcomes.
