When Biopure Corp. decided to file for Chapter 11 bankruptcy protection in July, the biotech was already working with Ropes & Gray LLP, the largest law firm in Boston.

But Biopure CEO Zaf Zafirelis decided to tap a much smaller firm, a 26-lawyer Boston-based outfit called Craig & Macauley PC with virtually no name recognition, to handle its bankruptcy proceedings.

“I was very, very impressed with the clarity with which they outlined what was going to happen,” said Zafirelis. “It’s a traumatic event for any company to file for bankruptcy. I can honestly say that working through this whole thing with (Craig & Macauley) made it a lot simpler for us.”

Like Craig & Macauley, bankruptcy boutiques across the country have been quietly booming in this economy as bankruptcies and workouts soar. Unlike large law firms which have been pummeled by the recession, forcing them to fire lawyers and entirely rethink established business practices, these smaller bankruptcy shops say the current economy is actually an opportunity to shine.

In major U.S. cities, Chapter 11 bankruptcy filings have spiked during the past 12 months as companies run out of cash and banks come to collect. In Boston, Chapter 11 filings have nearly doubled over the past year to 115 total cases in Boston during the period between January 1 and September 30, 2009, compared with 58 Chapter 11 bankruptcy filings during the same period last year, according to a review of filings at the U.S. Bankruptcy Court in Boston.

Bankruptcy boutiques are in a unique position to cash in on the boom because nationally there are literally only dozens that focus specifically on business bankruptcies, as opposed to individual bankruptcy filings. Small firms that have substantial bankruptcy practices include Craig & Macauley, Hanify & King PC in Boston, Warner Stevens LLP in Fort Worth, Texas, and Shaw Gussis Fishman Glantz Wolfson & Towbin in Chicago. While most large law firms have bankruptcy practices, they are conflicted out of handling many cases because they also work with large financial institutions. The sparse number of boutique bankruptcy firms can also be explained by the fact that the work is cyclical, and once the boom arrives, the matters are deeply complex.

Peter Roberts a partner with the bankruptcy law firm Shaw Gussis Fishman Glantz Wolfson & Towbin, says his firm began to see an uptick in work about six months ago for the types of companies the firm works with, which tends to be smaller- to middle-market businesses. In Chicago, Chapter 11 filings have more than doubled to 241 during the first three quarters of 2009, compared with 96 during the same period last year, according to U.S. Bankruptcy Court filings.

“The banks…have turned their attention to the smaller loans in their portfolios,” said Roberts, whose firm was founded in the mid-1990s.

Roberts notes that his firm, which is typically staffed with bankruptcy experts who are not fresh out of law school and have years of experience under their belts, is just the right size at 25 lawyers.

Meanwhile, in addition to handling Biopure’s Chapter 11 case, Craig & Macauley has worked with Chelmsford, Massachusetts-based Airvana Inc. since its largest customer, Nortel Networks, filed for Chapter 11 bankruptcy protection eight months ago. The law firm also works with Nantucket-based PB Realty Holdings LLC, a condo/hotel development that was forced into a Chapter 7 filing after failing to secure funding, among many other clients.

“This economy provides an opportunity for us, but I've never been one to say I hope for a bad economy,” said Christopher Panos, managing partner of Craig & Macauley. “We do this work in good economies or bad economies. But when we're doing this in a bad economy, our skill set tends to be showcased more. We get a higher profile because people are focused on what we do. But we've been here for 20 years.”

Craig & Macauley was originally founded as a firm with a strong banking practice and has indeed been located in the Federal Reserve Bank of Boston's building for 20 years. But the firm eventually shifted its focus to troubled companies and began handling more and more restructurings and bankruptcies. The firm still has a banking practice, but focuses mainly on community banks to avoid conflicts.

While Craig & Macauley does not disclose revenue, Panos says the firm is doing well and that handling the large cases like Airvana's, has been key, although the banking practice is off from last year.

Business is also good at Cohn Whitesell & Goldberg LLP, a five-lawyer Boston-based bankruptcy boutique founded in 1990. Daniel C. Cohn launched the firm after working in the bankruptcy practice of what is now Wilmer Hale as well as Fine & Ambrogne. Cohn decided to strike out on his own after conflicts of interest began to arise.

“Twelve months ago the practice was very slow,” said Cohn. “Now…business has picked up.”

Likewise, business has picked up at Fort Worth, Texas-based Warner Stevens LLP, which Michael Warner founded in 1994. Warner often gets case referrals from large firms, which aren’t worried that the firm is going to steal their clients. Lately, Warner has noticed more Chapter 11 filings that result in selling the business as a going concern, as opposed to restructuring the business.

But there’s no doubt that this economy is good for business. The Fort Worth area’s Chapter 11 bankruptcy filings have followed a similar pattern of other cities. They’ve nearly doubled to 64 during the first three quarters of 2009, up from 38 during the same period last year, per U.S. Bankruptcy Court filings.

“I'm thrilled about it—I love what I do,” said Warner.

Although Chapter 11 filings are up now, lawyers are predicting that those filings will increase over the next 12 months.

“Bankruptcies are a lagging indicator. They generally peak near the tail end of a recession rather than leading the recession,” said Harold B. Murphy, head of the bankruptcy and financial restructuring practice at Hanify & King. A “substantial” portion of the firm's 31 lawyers are devoted to bankruptcy and restructuring work.

“We anticipate that there’s going to be a substantial uptick in business bankruptcy filings over the next 12 months as companies run out of resources and have few options remaining,” said Murphy.

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Lisa van der Pool is a staff writer for the Boston Business Journal.