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Chapter 11 filings by businesses declined sharply in New Jersey in 2002, reflecting the continued popularity of other venues and less aggressive creditors after the terrorist attacks of 2001. The number of business Chapter 11s dropped from 354 in 2001 to 301 in 2002, a 15 percent decline compared with a 1.3 percent drop in the country as a whole. At the same time, the 43,724 New Jersey bankruptcy filings of all varieties represented a 4 percent increase from 2001, with the 26,768 consumer Chapter 7s leading the way. Meanwhile, filings rose 5.7 percent in the country as a whole. The U.S. Administrative Office of the Courts reported the statistics on Feb. 14 with a notice that the U.S. Judicial Conference had asked Congress to create more judgeships in 22 districts, including New Jersey. The request appears to recognize the existence of a continued high workload, albeit a slowly rising one. Business Chapter 11s in New Jersey declined every year from 1998 to 2000, spiked upward in 2001 and fell again last year. (See chart — Business Chapter 11 Filings in New Jersey) The Chapter 11 decline is partly a product of the inclination by debtors and creditors to avoid litigation, says Nancy Isaacson, who chairs the Chapter 11 committee of the New Jersey bankruptcy court’s Lawyers Advisory Committee. “Businesses are trying to do out-of-court workouts with lenders,” says Isaacson, of Springfield’s Goldstein, Lem & Isaacson. Daniel Stolz, chairman of the State Bar Association’s Bankruptcy Section, says most Chapter 11 filers are small and medium-sized companies. He says that after Sept. 11, 2001, creditors became less aggressive about demanding payment, partly because of an expectation that business would pick up when the trauma subsided. The forbearance, however, appears to have worn off as the economy continues to falter, says Stolz of Millburn’s Wasserman Jurista & Stolz. He predicts an upswing of Chapter 11 filings in 2003. Isaacson and Stolz also attribute the 2002 decline to the continued perception that other venues near New Jersey — Delaware and the Southern District of New York — are better places for debtors to file. In New York, in particular, “judges are perceived to be more permissive about letting the companies do what they want to do,” Stolz says. Many large corporations in New Jersey use New York lawyers who favor the Southern District, and the law permits them to file there, Stolz says. Among the New Jersey companies that filed Chapter 11 petitions in Manhattan last year were Suprema, a Paterson cheese company and Formica Corp. of Warren. New Jersey was not the only state that lost cases to the Southern District. To the dismay of Texas lawyers, Houston’s Enron Corp used the previous bankruptcy filing in New York by a subsidiary as the springboard to bringing the whole case into Manhattan. Delaware’s popularity appears to be waning. It received 559 business filings in 2002, compared with 1,289 the year before, a decline attributed by bankruptcy lawyers in New Jersey to concerns about the possible slow pace of litigation there. Judges, including two from New Jersey, were sent to Delaware temporarily and the Judicial Conference recommended putting four more permanent judges there. Stolz says consumer bankruptcies continue at a high level because there has been no letup in credit card company frenzy to sign up customers, even those with questionable ability to repay debts.

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