Ask the Experts: Bankruptcy Part II

This article was prepared by Justin Flowers, a director in Lateral Link's New York office.

Part Two

Last week, in the first part of this article, I addressed some of the basic issues surrounding the current legal hiring market for bankruptcy and restructuring/reorganization practices, including: 1) What sort of real opportunities are out there and where are they; 2) How much real practice-specific experience is necessary: and 3) What are the realistic chances for re-tooling from another practice area into such a practice? In this second installment, I am focusing on some further analysis and predictions for what the near future holds for the world of bankruptcy and how it might affect hiring this year, as well as ways to strengthen the case for successfully making the jump if you are not a mid level bankruptcy associate right at this moment.

When will bankruptcy work hit the point that being hired as a re-tool candidate becomes a possibility?

I get a lot of questions like this on firms' current and future capacity--have things hit the point where busy bankruptcy practices are unable to service the workload and need to bring in re-tools? And if not, when will that happen? The answer is that we don't know, and no one else does either. No one's crystal ball is working very well these days. Jack Williams, resident scholar at the American Bankruptcy Institute, recently predicted that Chapter 11 filings will rise at least 40% in 2009 from their 2008 levels, which were already highly elevated in comparison to recent years, according to this article by Mark Douglas of Jones Day. If Mr. Williams' prediction comes to fruition and the current trend continues or accelerates, it's conceivable that there could be an eventual tipping point, but only if other practice areas have enough business to prevent further cross-staffing amongst groups. As I mentioned last week, this is the single biggest impediment right now for would be bankruptcy associates looking to lateral in from a corporate or litigation background.

I have spoken with a number of bankruptcy associates, partners and recruiting coordinators, and although bankruptcy practices are indeed busy at present, a number of firms have not seen the tidal wave of work cascading over their walls that some forecasts had predicted and that many expected. Understandably, additional emergency help has not been needed so far. This isn't confined to any particular strata of firms or subset of practices either--groups in general are busy and would like experienced help if they can find it, but they aren't so far underwater that they are looking outside of those parameters. Again, there may very well come a point in the near future at which bankruptcy work picks up to the point that firms in fact can't keep up at the junior level, but we aren't there yet.

What other considerations should be kept in mind?

I realize that this is a particularly nasty job market for a lot of people, and it would be insensitive of me to ignore that fact and not offer some tips for those indomitable souls who will not be dissuaded and persist in an attempt to make the jump in the face of the broader bent of this article. Here are some things to think about.

First, be realistic. Remember that you must have at least some exposure to real bankruptcy work in a major law firm to have even the slightest chance of joining a bankruptcy group at this time. Having gotten an "A" in Bankruptcy in law school doesn't cut it if you have been doing only IPOs or fund formation or anything else except bankruptcy since then.

Second, keep some perspective. As recently as eighteen months ago, seemingly every attorney in the Northeast corridor wanted to be in a private equity, hedge fund or structured finance practice. There was a 2-3 year period where rabid hiring into these groups allowed a number of lawyers to lateral as a re-tool from other practices and geographic areas. But even at the height of that frenzied market, there were also a number of attorneys who were unable to switch into one of these practices. Some of those people are undoubtedly glad at this point that they couldn't and didn't make the jump. And some of those people were and are still bankruptcy attorneys who were very slow then but are now the envy of the industry. That's the nature of cycles. Additionally, if bankruptcy enjoys the same 2-3 year run as undisputed heavyweight champ of practice areas and drives the legal hiring market as such, there may very well be much greater macro economic problems than we are seeing even now, and the sky may indeed have fallen. So be careful what you wish for, Chicken Little.

Third, know your target practice. Bankruptcy practices vary greatly from firm to firm, and needs have grown increasingly specific even within broader practices. There are a number of ways in which a practice and position can be delineated--transactional, litigation, creditor side, debtor side, committee work, etc. Some firms have more general practices and handle multiple aspects of the practice--both debtor and creditor work, for instance--whereas some firms work almost exclusively on the creditor side. Along the same lines, some firms provide a strong mix of bankruptcy and restructuring/reorganization that require both transactional and litigation skill sets, whereas others can be more specific in their need for either developed litigation strength or a singular focus on the transactional side. Fine tune any presentation to fit a prospective practice's need as closely as possible to your actual experience. Firms with bankruptcy openings are explicitly asking for the experience, background and class level of candidates that they want to see. Doing a lot of committee work? That will greenlight you for some current openings and keep you out in the cold on some others. Have bankruptcy litigation experience? Again, that's a plus for some openings and a non-starter for others. But if you have the skills, experience and standing, it's absolutely to your advantage to have a conversation to see what your options are in a market currently full of them.

In the meantime, for those associates fortunate enough to still be gainfully employed: network within your firm to try to acquire some hands-on experience to include in your resume. Be proactive about this. Seek out partner contacts and ask if you can volunteer to work on a busy bankruptcy matter if it hasn't been offered to you. Beef up your resume to reflect as much bankruptcy and/or reorganization experience as possible.

Finally, no matter what your current situation, make sure that you cultivate and utilize relationships (with fellow alumni, with your law school's office of placement services, and yes, with a knowledgeable recruiter) that are able to maximize your access to available information and keep you plugged in to what is actually going on. Much like the stock market in the last couple of weeks, this is a day-to-day hiring market where real information is the most valuable commodity.

As always, I am happy to answer questions as quickly as I can. If you have further questions or are interested in discussing some of the current opportunities in more detail, feel free to contact me at jflowers@laterallink.com.