2009 has seen a dramatic rise in so-called prepackaged bankruptcy filings that streamline the bankruptcy process for large companies, according to a recent report from Reuters.

Companies filing for traditional bankruptcy can find themselves going through several years of Chapter 11 bankruptcy filing, which can interrupt business and create uncertainty.

Instead, in a prepackaged bankruptcy, companies can agree upon and arrange reorganization plans with their creditors before actually filing for Chapter 11 bankruptcy. Creditors have sometimes even voted on the prepackaged plan before it is filed.

The prepackaged bankruptcy is a form of agreement that is even more accelerated than a pre-negotiated bankruptcy in which companies and creditors agree on some but not all stipulations of the plan.

Prepackaged Plans Increase 300 Percent

There have been 30 prepackaged bankruptcies this year, the Reuters report notes—a 300% increase from just 10 such arrangements in 2008. With 164 companies that have public equity and debt who have filed for Chapter 11, the prepackaged bankruptcies represent 18% of the total number filed.

The much-publicized CIT Group Inc bankruptcy was arranged with a prepackaged bankruptcy agreement, as were those of other troubled companies like Six Flags Inc, Charter Communications Inc, Panolam Industries International Inc and Lear Corp. According to Reuters, the 30 prepackaged bankruptcies in 2009 represent some $124 billion in assets.

Fast Filings in Prepackaged Bankruptcy

With the prepackaged bankruptcy, companies can turn around a Chapter 11 filing in a matter of months, even when dealing with a huge company like CIT and its $80 billion in assets, which expects approval of its bankruptcy filing in December, a mere month after filing.

The results are less uncertainty about what the terms of the bankruptcy will be, and less disruption of the business in question.

Six Flags Inc, the world’s largest regional theme park operator, filed for bankruptcy in mid-2009, and continues to negotiate a finalized plan. Robert Rossiter, the Chief Executive of Lear Corp., which makes automotive seats and electronics, recently said in a statement that Lear Corp. had moved through the financial restructuring process without missing a beat operationally.

According to Reuters, the traditional Chapter 11 filing, without a prepackaged bankruptcy, is now often referred to as a free fall.