Working It Out

On its face, the term “bankruptcy lawyers” is a straightforward description of a specific legal practice. Some specialize either in corporate or personal bankruptcy, and some represent mostly debtors while others work mainly for creditors, but they’re all bankruptcy lawyers. Aren’t they?

On the corporate side, at least, the answer is, yes and no. “‘Bankruptcy lawyer’ is a term that confuses people,” says attorney Steven DeRuyter, a shareholder with Leonard Street and Deinard of Minneapolis. If you visit a doctor for an ailment, he says, the doctor might recommend a spectrum of treatments short of major surgery. For a company in trouble with its creditors, bankruptcy is an option amounting to surgery. “What I do,” DeRuyter says, “is work with distressed businesses to try to find solutions.”

He is not just using euphemisms. Neither are most attorneys who refer to themselves by such names as “turnaround lawyers.” By a margin of five or six to one, DeRuyter says, the majority of work he does for distressed corporate clients takes place outside of the court system in private “workouts” with creditors. That is to say, while he is, indeed, an expert in bankruptcy law, more than 80 percent of the distressed businesses he represents have not filed for bankruptcy protection. They hope to avoid the need.

Katherine Constantine, a partner at Dorsey & Whitney of Minneapolis, mostly works the other side of the table, representing banks, suppliers, and other creditors who are owed money by troubled businesses. She refers to herself as a corporate-restructuring lawyer; her clients’ interests often are best served if the debtor company does not file for Chapter 11 protection or get pushed into Chapter 7 liquidation.

John McDonald, a shareholder at Briggs and Morgan of Minneapolis, has represented debtor companies including Sun Country Airlines when it entered Chapter 11 shortly after the 9-11 terrorist attacks. His current clients are creditors, mostly major banks that lent money to commercial borrowers.

Whichever side of the fence an attorney works, McDonald says, “when the job is done properly, you really accomplish something. Either you right the ship, save jobs, and [emerge with] a productive company, or you get the assets into the hands of someone who can do something with them.”