Bankruptcy judges and lawyers in California are joining together to try to make the bankruptcy laws, and court rules there easier to understand. Part of why they are doing this is to stem the tide of companies that go to Delaware instead of California, as a place to file for bankruptcy. Delaware presently receives 60 percent of all of the bankruptcy filings nationwide.
A corporation may file for bankruptcy in the state in which it is incorporated, or in one where it has its principal place of business. Because many corporations are formed in Delaware, it is one of the available choices for many businesses. Delaware's Bankruptcy Court has a reputation for "being faster, more predictable and friendlier to debtors."
California is not the only place that is trying to catch up to Delaware by being more user friendly:
By considering new rules, the Central District joins a growing list of federal Bankruptcy Courts trying to woo distressed firms who would otherwise make tracks for Delaware. Bankruptcy Courts in Chicago, Miami, Nevada and Texas have either adopted or are considering such changes.
If the rules are approved, which is likely, they would be implemented about May 1.