Wolters Kluwer expert shares how lawyers can protect their clients’ security interests as bankruptcies rise

Economic conditions are contributing to a tumultuous business climate

NEW YORK--(BUSINESS WIRE)--According to the Administrative Office of the U.S. Courts, business filings rose 23.3% in the 12-month period ending June 30, 2023. Chapter 11 filings have jumped 68% in the first half of the year, as compared to prior year. For context, bankruptcy filings over any 12-month period have increased rarely since the peaks of 2010. With the increased risk of bankruptcy, transactional lawyers need to review and tighten their due diligence practices to protect their clients, according to Wolters Kluwer CT Corporation.

“If you represent lenders or other secured creditors, you’ll want to ensure that your clients’ security interests are perfected,” explains Elina Balagula, Transactional Business Consultant, CT Corporation, Wolters Kluwer Financial & Corporate Compliance, for Legal Reader.

Balagula goes on to illustrate some of the most common mistakes made—from errors in listing the debtor name and using the correct UCC form, to filing in the correct jurisdiction and remembering to include needed supporting attachments —and what law firms need to look out for in existing liens to ensure that if a bankruptcy does occur, their client gets prioritized in getting paid back.

“While there are many deals where lenders knowingly take on greater risk by holding unsecured debt in the hopes of higher returns, there are unfortunately also many situations where lenders believe to be secured only to find out in bankruptcy proceedings that their lien was unperfected. In bankruptcy, unsecured debt is the least preferred position and the last to recover,” she cautions.

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For more than 130 years, Wolters Kluwer CT Corporation has been the leading provider of registered agent services, incorporation services, and legal entity compliance. It is part of Wolters Kluwer’s Financial & Corporate Compliance (FCC) division and has a global reach into over 150 countries. More than 75 percent of Fortune 500 companies, 95 percent of AmLaw 100 law firms, and 350,000 small businesses trust CT Corporation to handle their compliance needs with the help of innovative solutions such as UCC Hub, an end-to-end due diligence workflow solution for corporate transactions. Wolters Kluwer Compliance Solutions, also part of FCC, is a market leader and trusted provider of risk management and regulatory compliance solutions and services to U.S. banks, credit unions, insurers and securities firms.

About Wolters Kluwer

Wolters Kluwer (EURONEXT: WKL) is a global leader in information, software, and services for professionals in healthcare, tax and accounting, financial and corporate compliance, legal and regulatory, and corporate performance and ESG. We help our customers make critical decisions every day by providing expert solutions that combine deep domain knowledge with specialized technology and services.

Wolters Kluwer reported 2022 annual revenues of €5.5 billion. The group serves customers in over 180 countries, maintains operations in over 40 countries, and employs approximately 20,900 people worldwide. The company is headquartered in Alphen aan den Rijn, the Netherlands.

For more information, visit www.wolterskluwer.com, follow us on LinkedIn, Twitter, Facebook, and YouTube.