Bankruptcy Update: The Reinvigoration of Texas’ Southern District

Over the past year, bankruptcy filings have surged in response to the economic disruption during the COVID-19 pandemic. Changes to the Small Business Reorganization Act of 2019 (SBRA) and the enactment of the Coronavirus Aid, Relief and Economic Security (CARES) Act encouraged the trend among small businesses by making restructuring easier and less expensive. The surge in filings in the Southern District of Texas has been even more exaggerated due to changes to the bankruptcy docket.  

In 2016, Houston’s Southern District began to assign all complex bankruptcy cases to two experienced jurists: Chief Judge David Jones and Judge Marvin Isgur. In the past the district had a reputation for inconsistency, but the pair’s efficient handling of cases in the last few years has garnered national attention. More companies are considering Covid-era restructuring, and more are turning to Texas’ Southern District for swift disposition of their cases. In 2020, the district was second only to Delaware in the number of bankruptcy filings, with almost four times the filings in 2019, and accounting for 47% of all large bankruptcies nationwide.   

The district’s reputation for speed and flexibility has attracted an array of businesses beyond the oil and gas industry. In 2020, Neiman Marcus, J.C. Penney, and NPC International, among many others, selectively filed Chapter 11 bankruptcies in Houston. Last month, Belk, a national department store chain based in North Carolina filed for bankruptcy in the Southern District, despite having no retail operations in the Houston area, presumably to take advantage of the district’s quick and predictable process. Belk’s reorganization plan was presented and approved by the court in a single day.  

Local companies are reaping the benefits of the improved process as well. In the last few weeks, a string of Texas based power companies have filed for bankruptcy in the Southern District after Winter Storm Uri led to massively inflated electricity costs. Brazos Electric Power Cooperative and Just Energy Group have also filed for bankruptcy since the storm, and Houston-based Entrust Energy followed suit this week, filing a Chapter 11 petition in the district on Tuesday.  

Kuiper Law Firm, PLLC has multiple attorneys licensed to practice in the Southern District of Texas. If you are considering bankruptcy as an option for your business, do not hesitate to contact us.