Improving the Bankruptcy Fee Review Process
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The global pandemic has created enough economic uncertainty that many experts are forecasting a significant increase in bankruptcy filings towards the end of 2020 and into 2021. Chapter 11 filings are up 28% from the previous year. A new wave of bankruptcy filings could occur in the coming months adding more pressure onto companies and the U.S. Trustee Program.
Legal Decoder has worked on several high-profile bankruptcies and analyzed hundreds of millions of dollars in fees for the U.S. Trustee’s Office. Along the way we have had the opportunity to observe and provide solutions to the challenges that come with the fee examination process during bankruptcy administration.
Challenges in the fee examination process
Fee examiners and firms face different challenges that directly affect each other. Firms representing the debtor and creditors have been working for months on bankruptcy tasks but may have to wait additional months before being paid for work performed. Additionally, firms may not get sufficient feedback on billing activity from the fee examiner until weeks and months after work has been performed which could result in more delays (i.e. ongoing fee negotiations, missed court hearings).
Fee examiners are challenged with a backlog of invoices to review especially for the 1st interim fee applications. Depending on deadlines fee examiners may not be able to complete thorough billing reviews which could lead to a risk of missing activities that are prohibited under billing guidelines. Unnecessary fees and expenses could be passed against the estate.
The good news is that there are ways to mitigate these risks and improve the fee review process.
Legal Decoder helps fee examiners
Fee examiners can provide deeper analysis and root out billing issues at a much faster rate using Legal Decoder’s bankruptcy solution. Ultimately, faster analysis leads to faster feedback to firms. Not only can firms be promptly paid for work but any objections to fees can be resolved prior to court hearings.
Legal Decoder’s bankruptcy solution assists fee examiners by:
Automating billing data analysis
Flagging activities that violate generally accepted billing practices
Surfacing patterns and trends over time
Improving the bankruptcy fee review process
For the PG&E bankruptcy the first dilemma was reviewing 1st interim application invoices given the short amount of time between fee examiner appointment and initial fee hearings. The backlog of billing data consisted of:
308 invoices
100,000 billing line items
$120M+ fees
20+ firms
Using Legal Decoder’s bankruptcy solution, the analysis of 1st interim billing data required only 9 weeks for completion. Through data analysis automation the fee examiner used objective data points to negotiate fees with firms and bring up any billing issues prior to hearings in relatively short order. Manual invoice reviews would have taken weeks longer with more dedicated reviewers at a higher cost overhead.
With Legal Decoder’s solution in place the PG&E fee examiner:
Reviewed an average of $32M in fees each month.
Achieved discounts of 4-7% range
Improved transparency and opened conversations with firms about billing activities
Benefitted from improved billing practices (improved billing hygiene, less senior-level staff performing junior-level tasks)
Additionally, for a large pharmaceutical bankruptcy, Legal Decoder performed a retrospective analysis for the 1st interim applications. Legal Decoder’s technology solution analyzed over 55,000 invoice line items from 218 invoices (20 different firms) in 6 weeks.
Legal Decoder’s bankruptcy solution helps fee examiners quickly review invoices, surface any billing issues, and bring meaningful dialogue with firms on billing guidelines. Inversely, firms will be paid more promptly for billed work and gain transparency into billing issues.
Learn more about Legal Decoder’s solution on our website or request a demo.