The Texas Lawbook interviewed seven of the top business bankruptcy lawyers in Texas about trends and developments in their practices during 2025. The experts include Sidley Austin partner Duston McFaul, Godwin Bowman partner Sid Scheinberg, O’Melveny & Myers partner Lou Strubeck, Haynes Boone partner Charles Beckham, Ross & Smith managing shareholder Frances Smith, Bradley Arant partner Jarrod Martin and Bracewell partner Trey Wood.
Texas Lawbook: When you look at the business bankruptcy numbers for the first half of 2025 showing the huge jump in cases filed in the Northern District of Texas and the substantial decline in the Southern District, what jumps out to you and why?
Sid Scheinberg: The Southern District of Texas, which was previously the most popular district for complex Chapter 11s, is no longer that. The obvious reason is based upon the issues regarding former Judge [David] Jones.
Trey Wood: The market clearly views NDTX as a viable option for complex Chapter 11 cases, and as a result, NDTX is picking up cases which traditionally may have been filed in the SDTX. The departure of Judges [Marvin] Isgur and Jones from the SDTX complex Chapter 11 panel opened the door for other jurisdictions to pick up cases from the SDTX, and the NDTX has taken advantage of this trend. However, that trend may slow with the appointment of Judges [Christopher] Lopez and [Alfredo] Perez to the SDTX panel, as law firms become more familiar with how they handle their cases and rule on various bankruptcy issues of interest to the market.
Lawbook: What have the Northern District of Texas bankruptcy judges done specifically to make NDTX a more attractive venue for businesses seeking to restructure?
Lou Strubeck: The adoption of the new local rules a couple of years ago definitely helped. The rules were intended to incorporate many of the aspects of the local rules in Houston that helped make that venue so popular. Also, the national bankruptcy bar, especially the lawyers and firms who control most of the debtor filings, are getting more comfortable with and trusting in the judges.
Charles Beckham: This question is easy. Three of the five bankruptcy judges in Dallas/Fort Worth are my former Haynes Boone law partners. In the past, when I had a difficult bankruptcy problem to solve, I always went to them for guidance and good judgment. I think the national bankruptcy bar has discovered something I knew for years: A wise and consistent bench attracts cases. Additionally, the Northern District of Texas recently updated their local rules to make the rules more user-friendly to debtors who are entering Chapter 11 in crisis.
Jarrod Martin: I think there’s been a deliberate, thoughtful effort to position NDTX as a sophisticated forum for complex business cases. Judge [Stacey] Jernigan has had her fair share of complex cases, but Judge [Scott] Everett and Judge [Michelle] Larson have the type of background that large debtor firms like to see. They’ve embraced procedures tailored for complex cases, and those procedures are now fully baked in. Lawyers know what they’re going to get. But the real catalyst, in my view, is the quality of the bar. Dallas has a group of high-caliber lawyers — Foley in particular on the debtor side — that helps get companies and national law firms comfortable with filing in NDTX.
Lawbook: Are you seeing any specific trends in new bankruptcy filings as related to business sectors?
Scheinberg: Seems to be a large number of healthcare companies filing, as well as restaurant groups such as a Pizza Hut franchise and Hooters.
Strubeck: Energy — oil and gas — mostly has been dead the last five-plus years. Lots going on in the healthcare sector, and arguably Dallas has emerged as the most popular venue for cases in this industry — e.g. Prospect and Genesis. Retail bankruptcies are still being filed but mostly not in Dallas. Given the administration in D.C., neutering of EPA and deemphasizing clean energy, clean energy companies are vulnerable, and there should be more filings in that industry.
Martin: We’ve already seen a large filing in SDTX in the solar sector with Sunnova. Will others in the clean energy and renewables space follow as tax credits dry up? Or will the market correct and take care of renewables due to rising load requirements from data centers as AI energy usage continues to increase. Not many people realize this, but a data center can gobble up as much power as the city of Austin. That increased energy load has to come from somewhere, and you can’t build a gas or nuclear plant overnight. The irony, of course, is that even with political headwinds and uncertainty around the One Big Beautiful Bill, renewables aren’t dead. They aren’t dead because of policy but because they’re the fastest lever we have to meet the explosive demand of AI.
Wood: Given the high cost of bankruptcy, the debtors tend to be larger companies with complex balance sheets and capital structures, which make it difficult if not impossible to restructure outside of bankruptcy. To combat against the cost of bankruptcy, companies normally enter bankruptcy with a prepacked plan of reorganization or prearranged restructuring support agreement with existing secured lenders normally swapping their debt for equity after a truncated marketing period in bankruptcy. In many cases, private credit has replaced traditional banks, making a debt for equity swap through bankruptcy a more attractive and viable option. We expect these trends to continue.
Lawbook: Many experts predicted a slew of commercial real estate property bankruptcies over the past two years, but we never saw that blitz. What do you think happened?
Duston McFaul: Out of court workouts, amend-and-extend and other non-publicized band-aids. There’s certainly lots of distress in segments of commercial real estate, but without a business to reorganize, they’re easier to address out of court.
Strubeck: The anticipated surge in commercial real estate restructurings never materialized. Not sure it ever will as lenders are making major concessions. Traditional commercial bank lenders don’t want their collateral back, since issues with commercial real estate have more to do with demand than ownership/borrower issues.
Smith: I think that after the COVID crisis, people started going back to the office. Generally, office vacancy rates are stabilizing and starting to decrease, and leasing activity is picking up. The data shows that certain retail markets have continued to do well, especially neighborhood shopping centers anchored by grocery stores and high-end retail because people tend to want to purchase high-end goods in person. Light industrial, like warehouses, are still doing well due to e-commerce demands. So overall, there was not the whole-market decline that people were so worried about occurring.
Beckham: The financings for many large real estate properties were to single-purpose vehicles that owned one property with no recourse to a solvent parent. If a project went bad and could not be saved, the project sponsor often tossed the keys back to the lenders and said, “Not my problem!” leaving the lenders with empty properties. Problem loans happened, but borrowers recognized that bankruptcy would not be a good solution.
Martin: Forbearance. Lenders have been kicking the can because the prospect of foreclosing — especially on office or retail assets — isn’t a pleasant one. They know that enforcing remedies could result in operating responsibility or, worse, write-downs and bankruptcies. Forbearance is the lesser of a few different evils, especially from a regulatory standpoint. So we’ve seen a lot of extensions, restructurings and creative solutions to delay defaults and the exercise of remedies. That said, we may still see a wave if interest rates stay elevated and refinancing options remain limited. I’d also flag Main Street Lending Program loans. Many of those borrowers are under strain, and lenders are still figuring out how to manage enforcement. I’ve worked on a few MSLP-related restructurings, and they are difficult to navigate. That’s a slow-moving storm that could break in the second half of 2025 and into 2026.
Wood: The premise upon which these predictions were made — that bankruptcy would be a viable and attractive option for commercial real property restructurings —was simply overstated. As noted, companies that file bankruptcy tend to be larger companies with complex capital structures and burdensome contracts. Bankruptcy gives these companies a forum to restructure their debt in ways which are not possible outside of bankruptcy. On the other hand, the capital structure of commercial real estate companies tends to be simpler, often involving two-party disputes, which are more easily and efficiently restructured outside of bankruptcy. Over the years, Congress has also enacted specific code sections dealing with the reject of nonresidential real estate leases in bankruptcy, lessening the benefit of the rejection of these contracts and making it harder for companies to shed these burdensome liabilities and contracts in bankruptcy. Real estate owners and lenders also tend to be more sophisticated in bankruptcy matters — having normally experienced several down cycles in their business careers — allowing them to better assess the cost-benefit of bankruptcy, which often leads to more restructurings outside of bankruptcy.
Lawbook: What are the basic considerations for a company when deciding whether to file in NDTX, SDTX or Delaware?
Martin: It really comes down to the complexity of the case, the location of the business and its stakeholders, the experience of the bench and (this is probably the biggest driver) the comfort level of lead counsel. Delaware still has cachet and deep experience. SDTX has remained active since 2016 and continues to get its fair share of complex cases. But NDTX is a serious option — the stats show that — especially for companies with Texas operations or advisors who have experience there. The district’s predictability, speed and sophisticated bench make it attractive.
Smith: The basic consideration is, first, where is venue appropriate? Then, if you have a choice of venue, considerations would be: favorable legal precedent for the company’s particular issues, predictability of local rules and processes, professional and knowledgeable judiciary, and convenience of the parties.
Strubeck: Judicial predictability — getting the right judge — is the main driver. In other words, a debtor-friendly judge who has industry knowledge and experience and will move a case quickly. Delaware isn’t the attractive venue it used to be, in part because of some rulings made that weren’t favorable to debtors and their professionals in large cases several years ago. Also, it’s harder to predict which judge you will get — [there are] six judges there. In Houston, you know you will get one of two, and in Dallas one of three. And in Dallas, you can mostly get the judge you want if you plan well. Fees are also a consideration. Although the gap has narrowed, it’s less expensive to run a case in Texas than Delaware.
Beckham: Many people assume that a troubled company makes the decision on where to file. Actually, lenders or capital providers may need to provide liquidity to the company to weather the storm of Chapter 11. As a result, it is often lenders and capital providers who make the venue decision. Texas courts have become predictable with the protections they will grant lenders in exchange for providing capital to successfully reorganize. Lenders crave safety and predictability if they are going to provide new capital. A sought-after venue for a large Chapter 11 needs to not only be debtor-friendly but also lender-friendly.
Wood: Predictability. Free falling into bankruptcy without an exit strategy can be very costly and lead to a tremendous amount of uncertainty for the company. Therefore, a company will want to know its exit strategy before filing if possible. And in selecting the venue in which to file, the debtor and its counsel will want to choose — to the extent it has options — the venue that they feel gives them the best chance of achieving its exit strategy. Therefore, debtors’ counsel will familiarize itself with how courts have handled prior cases with similar fact and legal issues. Delaware has had a long history of how it handles large complex Chapter 11 cases, and law firms are familiar with the Delaware judges and rulings. With the enactment of the SDTX complex Chapter 11 rules, law firms became accustomed to how Judges Isgur and Jones handled cases and ruled while they served on the SDTX panel, and as Judges Lopez and Perez take on more cases, firms will be able to better predict how they will handle cases and rule on various issues which might be of importance to the particular debtor or case in question. The same will be true for the NDTX as more cases are filed there.
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