The federal government has finally offered some clarity on how mom-and-pop businesses can avoid repaying their bailout loan—a major sticking point in the Paycheck Protection Program.In the past month officials in the Small Business Administration and the Treasury Department have worked with Congress to make much-demanded changes to the law, which culminated in the PPP Flexibility Act signed by President Donald Trump on June 5.With all remaining PPP loan applications expiring next week—June 30 is the last day to apply—here are the changes small-business owners need to know to receive forgiveness on current or future loans.RELATED ARTICLES Read this week’s issue of Crain’s New York Business onlineFAQ: A guide to SBA's disaster loans Here's why the $349 billion PPP ran out of moneyThe amount one is required to spend on payroll has shiftedThe first iteration of the PPP loan required small-business owners to spend 75% of the loan money they received on employee payroll before it could be considered for forgiveness. After an outcry from small-business owners, who considered the stipulation restrictive in light of a host of other operating costs, the revised PPP loan shifts that requirement to 60%.Furthermore, even if a borrowing small-business owner uses less than 60% of the loan amount on payroll, he or she will still be eligible to have a portion of the entire loan forgiven. The other expenses that can be funded from the remaining 40% of the loan money and still be forgiven are rent, mortgage payments, utilities and interest on loans. Expenses outside this realm are not forgiven.There is a new PPP loan forgiveness 'safe harbor' ruleThis change in the loan terms protects businesses that were unable to hire employees back to Feb. 15, or pre-Covid-19, levels from being penalized on their loan amount, as payroll is tied directly to the employee amount an owner can or had hired before the shutdown. Businesses have been given an extension to Dec. 31 to hire back employees they had on staff before February of this year. Basically the "safe harbor" rule applies to those small businesses that are still shut down. They can apply for a full PPP loan and not feel forced to hire back staff when they are not open. The rule has a second component. Businesses that hire employees back on salaries lower than before the pandemic—because of a decline in business activity or a lack of revenue—will not be penalized on their loan amount as long as they can document their drop in full-time employee salary was related to Covid-19 restrictions.The requirement to use funds within eight weeks of receiving the loan has been moved to 24 weeksThis is another important change to the program that could have ramifications on how much forgiveness is allocated to small-business owners. Borrowers who applied for and received PPP funds after June 5 will have 24 weeks (six months) until they need to spend the money. Those who received money before June 5 will still have eight weeks from the start of the loan to spend the money if they choose so, as they might find it advantageous to get it off their books. These borrowers are offered the flexibility to receive the 24-week extension. The repayment terms have been extended tooSmall-business owners who received PPP money on or after June 5 will now have five years to repay the amounts of the PPP loan that are not turned into a grant through the forgiveness provisions. Those borrowers who received PPP money before June 5 must pay their nonforgiven portions of the loan back within two years, although they can work with the bank that provided the loan to get an extension.PPP Forgiveness Application 3508EZ ( Revised 06.16.2020) by Janon Fisher on ScribdFurthermore, the SBA has amended the law to allow deferments on payments on principal, interest and fees associated with PPP loans to the date the SBA remits the loan to the bank. Previously the period was six months from the date of the loan. This amendment extends the clock from ticking too quickly on when a borrower is expected to pay back these costs.SBA offers 'EZ-Application' for eligible small- business ownersThis three-page PPP loan application simplifies the paperwork process and is available to small-business owners who are either self-employed or have no employees, did not reduce the wages of their employees by more than 25%, or can prove they experienced a drop in business activity because of Covid-19 and did not reduce their business wages by more than 25%.Letter

June 3, 2020International Business Times By Amy Fontinelle Declaring bankruptcy is never pleasant, but for small businesses it's often been disastrous. Filing under chapter 11 -- the method that allows a firm to re-organize -- was designed for large corporations. Technically, a small firm could do it, but the process was lengthy, costly, and creditor-friendly. As a result, insolvent small businesses often had to file for chapter 7, which meant closing shop entirely.But now there's a new way to declare bankruptcy, a more debtor-friendly alternative: subchapter V. Created by the Small Business Reorganization Act (SBRA) of 2019, it became effective February 19, 2020. And then, a month later, it got even better, thanks to the CARES Act, which tripled the qualifying debt limit under this option.Now, if you're a small business owner with less than $7.5 million in debt, and if you can demonstrate that staying open will generate enough money to repay your creditors over three to five years, you'll have a better chance at continuing to support yourself and serve your customers. Subchapter V: Are You Eligible?The SBRA originally made subchapter V -- so-called because it's a clause under chapter 11 -- available to small businesses whose secured and unsecured debts combined totaled no more than $2,725,625. When the CARES Act became law on March 27, 2020, that limit increased to $7,500,000. This higher limit is set to expire after March 26, 2021. At least half of the debt must be business (not personal) debt. One requirement to file for subchapter V is that the debtor (that is, you) be currently engaged in commercial or business activities. However, if your operation closed down when pandemic-induced stay-at-home orders went into place, here's the good news: Courts so far have taken a liberal view, ruling that businesses in similar situations are eligible to file.When you file, you'll incur a $1,167 case filing fee and a $550 administrative fee. The court may allow you to pay in installments within 120 days of filing (roughly $430 per month) or 180 days of filing (roughly $286 per month). You may also incur fees for professionals such as attorneys, accountants, appraisers, and auctioneers. How Subchapter V Works: Creating Your Reorganization PlanSubchapter V is unlike a regular chapter 11 case in that it doesn't require an impaired class --like a creditor who won't receive everything you originally owed them -- to accept your reorganization plan. The bankruptcy court can approve it without their acceptance as long as your plan is fair and equitable."Fair and equitable" means your plan must provide for all of your disposable income to go toward repaying your creditors over the next three to five years. You'll be able to use some of your income to support yourself, support any dependents, and operate your business. You won't be taking any vacations, but you won't be homeless and you might not have to lay off your employees.Your reorganization plan will include the information that would normally be included in a disclosure statement under regular chapter 11. This information includes a brief history of your business operations, a liquidation analysis, and financial projections for your business showing how you'll repay your creditors.A liquidation analysis is a good faith estimate of what your business assets could be sold for in a chapter 7 bankruptcy where you closed your business. The court will want to see that if you choose subchapter V, your debtors will be better off than if you liquidated under chapter 7.Unsecured creditors can really lose out in a liquidation bankruptcy, and even secured creditors may not recoup what they owe since it can be challenging to get the full value for assets sold in a distress sale. That said, if your business continues to struggle during your three to five years of payments, you may end up liquidating certain assets to pay your creditors, or even converting your case to chapter 7 and liquidating everything.Filing for Subchapter V: Trustee SupervisionFiling for any type of bankruptcy provides an automatic stay that requires creditors to leave you alone. Once the bankruptcy court discharges your debts., creditors cannot try to collect them. You can't be sued or held personally liable for them. Discharge occurs either upon confirmation of a consensual plan -- before you start making payments to creditors who have agreed to your plan, or after you make all your payments under the plan, for a nonconsenual plan.After you file, the U.S. Department of Justice will appoint a trustee to supervise your bankruptcy process. You'll give the trustee copies of your most recent tax return, statement of operations, cash flow statement, and balance sheet. They will help with your reorganization plan and attend your key court hearings.If your creditors approve your plan, the trustee's job ends there. If not, the trustee will oversee the entire three- to five-year repayment process. The trustee will not take control of your assets and cannot sell your assets, but the trustee will collect your payments and distribute them to your creditors. They may also inspect your business premises, books, and records if they give you reasonable advance notice.Who Should File Subchapter V?Subchapter V offers many benefits to small businesses that are struggling under too much debt. Of course, if you can work something out with your creditors without filing for bankruptcy, that's always the preferable course, saving you a lot of money. Subchapter V is for when your creditors won't budge, because the court can approve your case against their will. It's also for when you've pledged your home as collateral for a business loan you can't pay and you don't want to lose your home.If you think your business has a good chance to become profitable again and you don't want to close down for good, talk to a bankruptcy attorney about opening a subchapter V case.

June 12, 2020NY Post A large number of small US business could fail during the coronavirus recession, the Federal Reserve said on Friday, slowing recovery and creating lasting damage to the world’s largest economy. “The nature of the economic recovery that follows the COVID-19 crisis will depend in part on the survival of small businesses,” the Fed said in its biannual monetary policy report to Congress on Friday. “The pandemic poses acute risks to the survival of many small businesses [whose] widespread failure would adversely alter the economic landscape of local communities and potentially slow the economic recovery and future labor productivity growth.” Congress has extended some help, including $660 billion to cover payrolls and overhead. About three-quarters of small businesses with employees have applied for the aid, with many getting funding, the Fed said. Still, “some industries may face an ongoing need” after the program expires this summer. Meanwhile, job losses have been steeper at small businesses than large ones, with many small firms stopping paychecks entirely, the Fed said. Some 30 percent to 40 percent of small firms in sectors most affected by social distancing have gone inactive since February.Spending at small restaurants was down 80 percent by April during the height of the nation’s shutdowns and was still down by half in early June, the Fed said, citing data from credit card transaction processor Womply. Small businesses account for nearly half of jobs in the private sector, and new business formation fell steeply in the early months of the crisis, data from the Census Bureau shows. Small business failures not only destroy jobs but “erase the productive knowledge within the firms, deplete the assets of business owners, alter the character of communities and neighborhoods, and, in some cases, deprive the country of innovations,” the Fed said.

June 22, 2020NY Postby: Priscilla DeGregoryFashion brand Valentino wants to break the lease on its chic Fifth Avenue location — because the coronavirus is stopping it from conducting “high-end” business, a new lawsuit says. The Italian luxury retail and design company says even if the Big Apple overcomes the pandemic, “the social and economic landscapes have been radically altered in a way that has drastically, if not irreparably, hindered Valentino’s ability to conduct high-end retail business,” at the primo shopping locale, according to the Manhattan Supreme Court lawsuit filed Sunday. Valentino is asking a judge to allow it to break its pricey lease with landlord 693 Fifth Owner, LLC by the end of the year, despite a contract that is slated to run through July 2029, the court papers say. Valentino — which leases four levels at the location — initially signed the contract in May 2013, the court documents say. Since the state “PAUSE” executive order went into effect closing businesses for months — and which is now only allowing them to open in a very limited way — Valentino cannot “offer in-boutique retail sales, or associated services such as fittings … as the company operated before the COVID-19 pandemic,” the lawsuit claims. New Yorkers have suffered major financial setbacks, including high unemployment rates, which has led to a major consumer spending decline — while new safety protocols “have severely impacted brick-and-mortar retail sales, and will continue to do so, indefinitely,” the court filings say.“Even if such restrictions are eased (at some point), continued social distancing, as well as other limitations, will make it impossible for Valentino to operate its boutique as initially envisioned under the Lease,” the court papers say. After notifying the owner it wanted to break the lease, Valentino was told on June 19 through a lawyer that 693 Fifth Owner, “would not accept such a surrender, and, notwithstanding the COVID-19 pandemic, disputed that Valentino’s obligations under the Lease have been excused, leaving Valentino with no alternative but to commence this action,” the suit alleges. 693 Fifth Owner lawyer Robert Cyruli told The Post, “My client will not choose to litigate this in the media.”

June 17, 2020bloomberglaw.comRetailers hit by the economic downturn are considering bankruptcy protections. Perkins Coie LLP attorneys say the CARES Act offers small businesses access to the streamlined Subchapter 5 process and recent rulings from bankruptcy courts provide cash flow relief for certain retailers operating under Chapter 11 through deferral of rent obligations, at least for now.JC Penney’s bankruptcy filing on May 15 is one of the latest in a string of high-profile retailers, including Neiman Marcus, seeking bankruptcy protection in the wake of the Covid-19 public health emergency. Many other retailers may soon follow suit given the virus’ economic consequences and the industry issues many retailers have long faced.Fashion, cosmetics, and personal care retailers may be particularly hard hit as they often rely on in-store experiences for sales. Experiences like spritzing fragrances, testing creams, running hands over fabrics are gone in the age of stay-at-home orders, a stagnating economy, record unemployment, and nearly nonexistent foot trafficHowever, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and recent bankruptcy rulings may provide retailers, including small businesses, with much needed relief, albeit in certain temporary ways.Filing for Bankruptcy as Sales FallNeiman Marcus and JC Penney may be the tip of the iceberg as many retailers face plummeting sales. According to the Commerce Department, April retail sales fell by 16.4% year-on-year, far worse than predicted. Clothing stores were particularly hard hit, with sales falling 89% from a year ago.Bankruptcy can provide relief in challenging times for businesses facing new economic realities. Chapters 7 and 11 are the primary bankruptcy avenues for businesses. While Chapter 7 involves liquidation, businesses may reorganize or sell their assets as going concerns under Chapter 11.Most often when a retailer commences a Chapter 7 case, it ceases sales and other operations. Often, liquidation results in the business’ termination. An appointed trustee takes control of remaining operations and all assets, which may include accounts receivable and litigation claims. All proceeds not distributed to secured creditors are used first to pay the costs of the bankruptcy process, then to pay other debts, and lastly sometimes to make distributions to equity holders.Thinking they can keep their doors open, most household-name businesses and others commence Chapter 11, which can keep customers shopping while the business creates and implements a “plan” to pay off its debts and often restructure its operations.Benefits of the CARES Act for Small BusinessesThe CARES Act has modified previously existing bankruptcy options to create further potential benefits for small businesses filing under Chapter 11.Effective March 27, 2020, the CARES Act temporarily modified the Small Business Reorganization Act of 2019 (SBRA) to provide certain businesses a faster, less expensive, and more tailored approach to Chapter 11. Previously, the SBRA had crafted a streamlined Chapter 11 process referred to by its legislative location, “Subchapter 5.” However, the benefits of this process were limited to debtors with total secured and unsecured debt up to $2,725,625.The CARES Act temporarily increased the debt limit for Subchapter 5 to $7.5 million. The result is that substantially more small businesses will qualify for reorganization under Subchapter 5’s new debt cap, allowing these businesses to seek to reorganize in the streamlined fashion that was once only available to companies under the pre-CARES Act cap.Some benefits of reorganization under Subchapter 5 include: Streamlined reorganization plan submission and confirmation process when contrasted with other Chapter 11 cases.Exemption from quarterly trustee fees.Creditors’ committees are not appointed, and consequently there is less administrative cost.No absolute priority rule, and instead unsecured creditors receive a pro rata share of the business’s income over a three- to five-year period, benefitting existing equity holders.These changes alone can measurably reduce the time, expense, and reputational impact of small company Chapter 11 reorganization efforts. But the CARES Act changes are expected to be available for a limited time. The temporary increase to Subchapter 5’s debt limit lasts only for one year from the enactment of the CARES Act, March 27, 2021. The debt limit will then return to $2,725,625, unless the nearly tripled debt limit is extended. Recent Bankruptcy Rulings Support Struggling Businesses During Covid-19Once in Chapter 11 bankruptcy, even if not under the streamlined Subchapter 5 processes, several recent bankruptcy courts have assisted retailers facing severe cash flow pressure during the Covid-19 crisis.Paying rent is one such pressure. Under the Bankruptcy Code, businesses are generally required to remain “current” on rent in their commercial leases from the date of the bankruptcy case going forward, subject to a possible grace period for the first 60 days of the case.Yet the bankruptcy court in In Re Pier 1 Imports Inc., relieved the debtors of their obligation to pay rent on a current basis, extending the grace period beyond the 60 days.The court reasoned that the pandemic made it impossible for the debtors to generate sufficient revenue to pay rent on a current basis, even after reducing costs. Landlords were entitled to accrue administrative expenses for unpaid rent, not to current payment of rent.The court noted it has not yet decided “whether the government-mandated closures” might excuse performance “due to impossibility, impracticability, or frustration of purpose.” Not surprisingly, the landlords have appealed.Elsewhere, at least two other bankruptcy courts have granted similar relief. In Re Modell’s Sporting Goods Inc., No. 20-14179 (VFP) (Bankr. D.N.J., March 27, 2020); In re CraftWorks Parent LLC, No. 20-10475 (BLS), Docket No. 217 (Bankr. D. Del. March 30, 2020).Other retail debtors dependent on in-person customers have likewise asked for similar rent relief. It is expected that the trend of debtors requesting, and courts likely granting, such relief will continue. 

A Moratorium on Evictions Ends, Leaving Thousands of Tenants FearfulEviction cases are expected to soar in New York City as housing courts reopen and landlords seek to recoup income lost during the pandemic.A moratorium on evictions that New York State imposed during the coronavirus pandemic expired over the weekend, raising fears that tens of thousands of residents struggling in the worst economic collapse since the Great Depression will be called into housing courts, which reopened on Monday.Housing rights groups estimate that in the coming days, 50,000 to 60,000 cases could be filed in New York City’s housing courts. In addition, thousands of cases that were already in progress but were paused in March can now resume.The number of eviction cases expected to be filed reflects the typical caseload in a three-month period, which was the length of the moratorium. But it does not take into account the fallout from the more than one million city residents who have lost their jobs or were furloughed in recent months and whose federal stimulus payments of an extra $600 per week will soon run out, housing advocates say.A second order issued by the state that shields tenants directly affected by the pandemic expires in late August and could produce an even bigger wave of eviction cases.“All levels of government have to realize that they cannot let tens of thousands of people end up in homeless shelters,” said Edward Josephson, the director of litigation and housing at Legal Services NYC. “It’s the most dire thing that we have ever seen.”But many landlords say they, too, are facing financial calamity, with the loss of rental income leaving them unable to pay their own bills, including mortgages, and invest in building upkeep.“It is clear that the economic impacts of the Covid-19 pandemic are nowhere near an end,” said Jay Martin, the executive director of the Community Housing Improvement Program, or CHIP, which represents about 4,000 property owners. “There are thousands of tenants and building owners who need help now.”As housing courts nationwide begin to reopen and federal stimulus checks are about to end, eviction cases are expected to soar. A recent report by Amherst, an analytics and data real estate firm, found that up to 28 million renters are at risk of eviction.In the days leading up to the first moratorium deadline, dozens of members of the New York State Legislature, as well as many housing groups, urged Gov. Andrew M. Cuomo to extend universal protection to all tenants, even in cases not directly caused by the pandemic.They also expressed concern that housing courts would reopen physically on Monday, placing tenants and others at risk of contracting and spreading the virus.But the state’s chief administrative judge, Lawrence K. Marks, decided against that, citing public health concerns. But case filings can be sent online or through the mail, and hearings will be held virtually.Susanna Blankley, the coalition coordinator for the Right to Counsel NYC Coalition, said it was “unconscionable” for housing courts to restart at all.“In what world is it good to evict people in the middle of a pandemic?” Ms. Blankley said. “Who are you opening for? It has to be for the landlords.”Even though the courthouses were closed on Monday, people protested the virtual reopening outside the Brooklyn location, holding signs that read, “EVICTION FREE NYC.”The past three months have been extremely difficult not only for tenants, but also for smaller landlords.About 25 percent of renters have not paid rent in May, April and June, according to a survey by CHIP. About 20 percent of the landlords represented by the group said they were concerned about losing their properties.Lincoln Eccles, who owns a 14-unit apartment building in Crown Heights, Brooklyn, said the closing of housing courts in March delayed two cases he had against separate tenants who have not paid rent in years. Together, the tenants owe tens of thousands of dollars in rent, he said.He said he collected full rent payments from only nine of his 14 units this month; some of the tenants have not paid because of the pandemic, he said.“If it’s a choice between me being solvent or the tenant staying in place, I have no choice but being solvent,” said Mr. Eccles, who said he was operating in the red this year.

Commercial leases in New York City, COVID-19 and Recent ProtestsAs a result of COVID-19, recent protests and the advent of technologies such as Zoom and Google Meet, many tenants have excess office space/s that they cannot or do not want to continue to rent  and would   like to terminate their lease or stop paying rent.At Shenwick & Associates, we have received many calls from clients with these issues and we have developed a strategy to address them.First, we review the company's financial information including a recent balance sheet, income statement,  the commercial lease and guaranty, if any. Second, we determine if the company is a candidate for a bankruptcy filing, either chapter 7 (a liquidation where the company closes as a result of the filing), a small business Subchapter 5 bankruptcy filing, or a full-blown chapter 11 business bankruptcy filing.In the case of a Chapter 7 filing, the lease will terminate; however, the Chapter 7 bankruptcy trustee appointed to the case will also liquidate or close the business. For businesses that are losing money or do not see a bright future, this may be a good strategy.A company that wants to remain in business, but terminate or reject their lease, should consider a bankruptcy filing under  new Subchapter 5, which is a fast-paced, less costly chapter 11 business bankruptcy filing. As part of a Subchapter 5 bankruptcy filing, the lease can be rejected, and the landlord would be paid their lease rejection damages and other monies owed over 5 years or less from disposable income of the business.If Subchapter V does not work due to the debt limit of $7,500,000 or for other reasons, a company can consider a full-blown chapter 11 bankruptcy filing. However, they would want to consider the cost from a chapter 11 filing, versus the expected savings from rejecting the lease. Chapter 11 is a complicated, risky and expensive process for many companies.Another strategy that we have been using with much success is preparing a bankruptcy petition, without filing the petition (a so called Pro-Forma Bankruptcy Petition). This bankruptcy petition would accurately disclose the assets, liabilities and earnings of the company. Then we would forward that bankruptcy petition to the landlord or their counsel indicating that if the tenant and landlord cannot reach an agreement where the tenant is allowed to terminate their lease (pursuant to a Lease Surrender Agreement), then the tenant or company will file for bankruptcy. The benefit of this strategy is that it is quick, relatively inexpensive, the landlord gets financial disclosure regarding the company or tenants finances upfront without litigation or discovery and we convince the landlord that releasing the tenant from their lease is a “win-win” for both the tenant and the landlord. How is this strategy a win for the landlord? The landlord keeps the tenant’s security deposit, the Landlord will also  save substantial money on bankruptcy and landlord tenant legal fees, they remove an unprofitable tenant from their building, and they obtain possession of the premises quickly allowing them to re-let the space.One of the reasons that we have had much success with this strategy in these trying times is that we have been filing  bankruptcy petitions  for over 20 years and the landlord or their counsel can Pacer our law firm’s bankruptcy filings, or visit our website and blog. Based upon our work and experience in this area of the law, landlords realize that bankruptcy is a real option for the tenant not an idle threat. Clients or their advisors who would like to discuss these strategies with Jim Shenwick or schedule a consultation can reach him at 212-541-6224 or email him at [email protected]

A Tidal Wave of Bankruptcies Is ComingExperts foresee so many filings in the coming months that the courts could struggle to salvage the businesses that are worth saving.Already, companies large and small are succumbing to the effects of the coronavirus. They include household names like Hertz and J. Crew and comparatively anonymous energy companies like Diamond Offshore Drilling and Whiting Petroleum.And the wave of bankruptcies is going to get bigger.Edward I. Altman, the creator of the Z score, a widely used method of predicting business failures, estimated that this year will easily set a record for so-called mega bankruptcies — filings by companies with $1 billion or more in debt. And he expects the number of merely large bankruptcies — at least $100 million — to challenge the record set the year after the 2008 economic crisis.Even a meaningful rebound in economic activity over the coming months won’t stop it, said Mr. Altman, the Max L. Heine professor of finance, emeritus, at New York University’s Stern School of Business. “The really hurting companies are too far gone to be saved,” he said.Many are teetering on the edge. Chesapeake Energy, once the second-largest natural gas company in the country, is wrestling with about $9 billion in debt. Tailored Brands — the parent of Men’s Wearhouse, Jos. A. Bank and K&G — recently disclosed that it, too, might have to file for bankruptcy protection. So did Weatherford International, an oil field services company that emerged from bankruptcy only in December.More than 6,800 companies filed for Chapter 11 bankruptcy protection last year, and this year will almost certainly have more. The flood of petitions from the worst economic downturn since the Great Depression could swamp the system, making it harder to save the companies that can be rescued, bankruptcy experts said.Most good-size companies that go into bankruptcy try to restructure themselves, working out payment agreements for their debts so they can stay open. But if a plan can’t be worked out — or isn’t successful — they can be liquidated instead. Equipment and property are sold off to pay debts, and the company disappears.Without reform in the system, “we anticipate that a significant fraction of viable small businesses will be forced to liquidate, causing high and irreversible economic losses,” a group of academics said in a letter to Congress in May. “Workers will lose jobs even in otherwise viable businesses.”Among their suggestions: increasing budgets to recall retired judges and hire more clerks, and giving companies more time to come up with workable plans to prevent them from being sold off for parts.“Tight deadlines may lead to overly optimistic restructuring plans and subsequent refilings that will congest courts and delay future recoveries,” they wrote.The pandemic — with its lockdowns, which have just started to ease — was enough on its own to put some businesses under. The gym chain 24 Hour Fitness, for example, declared bankruptcy this week, saying it would close 100 locations because of financial problems that its chief executive attributed entirely to the coronavirus.But in many cases, the coronavirus crisis exposed deeper problems, like staggering debts run up by companies whose business models were already struggling to deal with changes in consumer behavior.Hertz has been weighed down by debt created in a leveraged buyout more than a decade ago, and added to it with the acquisition of Dollar Thrifty in 2012. As it was battling direct competitors, the ascent of Uber and Lyft further upended the rental-car industry.J. Crew and Neiman Marcus were carrying heavy debt loads from leveraged buyouts by private equity firms while struggling to deal with the changing preferences of shoppers who increasingly buy online.Oil and gas companies like Diamond and Whiting borrowed heavily to expand when commodities prices were much higher. Those prices started to fall as production increased, and plunged further still when Russia and Saudi Arabia got into a price war shortly before the economic shutdowns began.(And then there are cases that have nothing to do with the pandemic but nonetheless take up time and energy in the courts. Borden Dairy, a Dallas company with a history that goes back to 1857, declared bankruptcy in January, a victim of declining prices, rising costs and changing tastes.)A run of defaults looks almost inevitable. At the end of the first quarter of this year, U.S. companies had amassed nearly $10.5 trillion in debt — by far the most since the Federal Reserve Bank of St. Louis began tracking the figure at the end of World War II.“An explosion in corporate debt,” Mr. Altman said.Having a lot more debt to deal with is likely to make the coming bankruptcies a bruising experience for unsecured creditors, who may include retirees with pensions or health benefits, vendors waiting to be paid, tort plaintiffs whose lawsuits are cut short and sometimes even current workers. If a company goes into bankruptcy with more secured debts than the value of its assets, the secured creditors — including vulture investors who bought up the debt for a song — can walk away with virtually everything.The sums at play in some of these cases will be enormous. Mr. Altman expects at least 66 cases with more than $1 billion in debt this year, eclipsing 2009’s mark of 49. He also predicted 192 bankruptcies involving at least $100 million in debt, which would trail only 2009’s record of 242.Robert J. Keach, a director of the American College of Bankruptcy, said many companies had so far managed to put off bankruptcy by amassing cash and conserving it as best they can: drawing down existing credit lines, furloughing workers, delaying projects and taking advantage of federal and state pandemic-relief programs.But when those programs expire, the companies will start burning through their cash. That’s when bankruptcy filings are likely to soar and stay elevated, Mr. Keach said.Expect “a Covid-19 cliff” in the next 30 to 60 days, he said.Companies that received loans under the federal Paycheck Protection Program may be waiting to file, said Mr. Keach, who practices bankruptcy law with the firm of Bernstein Shur in Portland, Maine. The loans can be converted to grants if the companies meet certain requirements, and if the borrowers can put off bankruptcy until they’re sure they won’t have to pay the money back, they will have more cash when they file.That’s an important consideration, because Chapter 11 is expensive. A bankrupt company must pay the fees of the lawyers and other professionals that help it reorganize, as well as the fees of those who advise the official creditors’ committees.The experts’ recommendations to Congress walk a fine line. They suggest allowing companies more time to come up with reorganization plans, even though Chapter 11 cases are supposed to move quickly so bankrupt companies don’t burn through their cash before they reorganize.Generally, the longer a company stays in bankruptcy, the greater the chances of a liquidation. And that increases the likelihood that the company’s troubles will spread: Suppliers of raw materials could fold if a manufacturer languishes in bankruptcy, and smaller stores in entirely differently lines of business can suffer if a shopping-mall anchor can’t stay open.These risks are real, said Robert E. Gerber, who retired in 2016 as a bankruptcy judge in the Southern District of New York. One of his cases was the 2009 bankruptcy of General Motors, which moved at lightning speed to keep the automaker from going under for good.“If G.M. had failed, God knows how many companies in the supply chain would have failed, and this would have snowballed terribly,” said Mr. Gerber, who is now of counsel with the Joseph Hage Aaronson firm. The cascade would have wiped out paychecks to workers throughout the supply chain, threatening other businesses and even the finances of the local governments that count on them for tax revenue.That, Mr. Gerber said, makes it imperative that the bankruptcy system have the resources to deal with the coming rush of cases.“Bankruptcy can’t print money for those companies,” he said, “but it can give a good number of them a chance of survival.”

Reorganizing Your Debt under Chapter 13 Bankruptcy Huge debts can become overwhelming. You may try to pay them off, but your credit card interest rates just keep resetting higher and higher as your credit score suffers, making it harder for you to pay down the balances. You may want to pay what you owe to your mortgage, but your lender won’t work with you. You may want to pay off your medical debts, but the sums are just outrageous, and it feels like you will never be able to pay them. You can get the debt relief you need by filing for bankruptcy. Chapter 7 bankruptcy tends to offer the most relief since it liquidates your unsecured debts, relieving your need to pay them. However, you must pass a means test in order to file for Chapter 7 bankruptcy, and some people make too much money or have too many assets to file. In that case, you can still get debt relief by filing for Chapter 13 bankruptcy in Mesa. Debt Repayment Plan What Mesa Chapter 13 bankruptcy does is put you on an affordable debt repayment plan. This type of bankruptcy is often known as “debt reorganization.” Your Mesa bankruptcy attorney and the bankruptcy trustee create a repayment plan that prioritizes your secured debts, such as your home or car loans, and creates a monthly payment for all your debts that you can actually afford. The repayment plan takes into consideration your income as well as your debts. The plan is designed to last only three to five years. Under a Chapter 13 bankruptcy repayment plan, certain debts must be paid in full, including: Your mortgage Your auto loan Back taxes Student loans You will also be responsible for continuing to pay your alimony and child support. In some cases, your Phoenix bankruptcy attorney may be able to negotiate a lower interest rate for some of these payments so that it is easier for you to pay off your debts. Under this plan, you may be able to pay what you owe on your mortgage to keep your house out of foreclosure or to save your car from repossession. The plan allows you to catch up on what you owe while also making your debt more manageable. Unsecured Debts Your unsecured debt will also be included in your Chapter 13 bankruptcy repayment plan, including credit cards, medical bills, and some personal loans. Often, you’ll save money on these debts because you’ll be paying under a lower interest rate and you’ll be avoiding late charges and other penalties. At the end of the repayment period, you may not have paid back all your unsecured debt. If that is the case, that debt will likely be discharged. Therefore, you will only pay back a portion of your unsecured debt, based on your ability to pay, as determined by the bankruptcy courts. While Chapter 13 bankruptcy does not completely eliminate debts, it is often preferable to Chapter 7 bankruptcy because it allows you to keep all of your assets, such as your home and your car. Chapter 13 bankruptcy can also help you save your house from foreclosure or your car from repossession, which you cannot do with Chapter 7 bankruptcy. With Chapter 13, you can get a greater handle on your debt, while also freeing yourself of the burden of some of your unsecured debt. Talk to an experienced bankruptcy attorney serving Gilbert to review your finances and determine whether Chapter 13 bankruptcy would be right for you, or whether you would benefit more from other debt relief options. The bankruptcy attorneys at My AZ Lawyers can help you learn about your bankruptcy options and how each of them might provide you with debt relief so that you can regain control of your finances. We will thoroughly review your finances to better understand your debts and your financial means so we can suggest the best path forward. Our goal is to help you get the maximum debt relief possible. We help individuals and businesses with multiple bankruptcy filings, including both Chapter 7 bankruptcy and Chapter 13 bankruptcy for individuals. We serve clients throughout the Phoenix, Mesa, Tucson, and Glendale areas. Contact us today to talk to a bankruptcy attorney about your options. Arizona Offices: Mesa Location: 1731 West Baseline Rd., Suite #100 Mesa, AZ 85202 Office: (480) 448-9800 Email: [email protected] Website: https://myazlawyers.com/ Glendale Location: 20325 N 51st Avenue Suite #134, Building 5 Glendale, AZ 85308 Office: (602) 509-0955 Tucson Location: 2 East Congress St., Suite #900-6A Tucson, AZ 85701 Office: (520) 441-1450 Avondale Location: 12725 W. Indian School Rd., Ste E, #101 Avondale, AZ 85392 Office: (623) 469-6603 The post Reorganizing Your Debt under Chapter 13 Bankruptcy appeared first on My AZ Lawyers.

Can I Clear My Medical Debt by Filing for Bankruptcy in Arizona? There is no shortage of information about how health care expenses have spiraled out of control. Life-saving drugs cost thousands of dollars a month in some cases, and a single surgery can cost more than the price of a house. Insurance may cover some of that, but most insurance will not cover all of it. You may still owe tens of thousands of dollars for medical care, even if you have health insurance. If you don’t have health insurance, you could lose everything trying to pay off your medical bills. Fortunately, you do have options other than struggling in debt for years or selling off everything you own to pay for your medical expenses. Filing for bankruptcy in Glendale may be able to help you get rid of your medical expenses or to make them more manageable to pay. You should talk with a Glendale bankruptcy attorney to find out exactly how bankruptcy can help your particular circumstances. Chapter 7 Bankruptcy Filing for Chapter 7 bankruptcy in Phoenix can get rid of your medical expenses entirely. Chapter 7 bankruptcy discharges, or erases, all unsecured debt – which is debt that is not backed by some property as a promise in case of default. Doctors, hospitals, and other medical providers do not have the right to seize your home or personal property if you do not pay them. They are unsecured creditors, which means they have only your word that you are going to pay. Before you can file for Phoenix Chapter 7 bankruptcy, you have to qualify. You must pass a means test, which looks at your income in comparison to the average, as well as other factors. If you do not pass the means test, you cannot file for Chapter 7, and you cannot completely liquidate your medical debts. If you do qualify for Chapter 7, there is no limit on how much medical debt you can discharge. You could have hundreds of thousands of dollars in medical debt, and it can all be cleared when the bankruptcy is closed, which typically takes only a few months. Chapter 13 Bankruptcy If you cannot file for Chapter 7 bankruptcy, you can still get some relief from medical debt by filing for Chapter 13 bankruptcy in Mesa. Under Chapter 13, a debt repayment plan is created for you based on your ability to pay. You can put all your medical debt into a three- to five-year repayment plan. You will pay a lower monthly payment, avoid late fees and other penalties, and then likely have your debt dismissed when the repayment plan is over. Filing for Mesa Chapter 13 bankruptcy will put an end to the calls and letters you receive from your debtors, and it will give you an end point for paying off your debt. You also have the option to pay less of your debt than you would if you were just paying the bills as they came in. Filing for Chapter 7 or Chapter 13 bankruptcy in Phoenix can provide you with great relief from overwhelming medical debt. You might get immediate relief from all debt with Chapter 7, or you might reduce the burden by putting your debt into a manageable repayment plan under Chapter 13. You should talk to a bankruptcy attorney serving Phoenix to determine which chapter of bankruptcy would be best for your financial circumstances and your goals. Your Arizona bankruptcy attorney can help you understand the best course of action to take to reach your goals as quickly as possible. The bankruptcy attorneys at My AZ Lawyers are ready to help you get the maximum debt relief possible through bankruptcy, whether you are struggling with medical debt or some other kind of debt. We may be able to help you get total liquidation through Chapter 7, or we may help you get on an affordable debt repayment plan through Chapter 13. If you own a business, we can also help you explore the business bankruptcy options. We serve both individual and business clients through the Mesa, Glendale, Tucson, and Phoenix areas. Call our bankruptcy law office today to schedule a consultation with a reputable and committed bankruptcy attorney to learn about your options for debt relief. Arizona Offices: Mesa Location: 1731 West Baseline Rd., Suite #100 Mesa, AZ 85202 Office: (480) 448-9800 Email: [email protected] Website: https://myazlawyers.com/ Glendale Location: 20325 N 51st Avenue Suite #134, Building 5 Glendale, AZ 85308 Office: (602) 509-0955 Tucson Location: 2 East Congress St., Suite #900-6A Tucson, AZ 85701 Office: (520) 441-1450 Avondale Location: 12725 W. Indian School Rd., Ste E, #101 Avondale, AZ 85392 Office: (623) 469-6603 The post Can I Clear My Medical Debt by Filing for Bankruptcy in Arizona? appeared first on My AZ Lawyers.