Bankruptcy

Individual chapter 11 reorganization cases often play a role in Entrepreneur Rescue.[1] The Small Business Reorganization Act of 2019 (the “SBRA”) vitalized the process with Subchapter V. Subchapter V provides an expedited, simpler and less expensive route through chapter 11 of the Bankruptcy Code for small businesses and their owners.[2] As we’re often quoted, properly timing any bankruptcy case is essential. Poor timing can result in lost opportunities and higher risks. Properly timing a Subchapter V case is also essential. Mis-timing a Subchapter V case in the Entrepreneur Rescue process…Read More

The Small Business Reorganization Act of 2019 (the “SBRA”) provides an expedited, simpler and less expensive route through chapter 11 of the Bankruptcy Code for small businesses. Plus, it preserves the owners’ equity interest in their company; even without paying creditors what they are owed. Initially, to qualify as a small business the debtor could have no more than $2,725,625 of debt. Responding to the Coronavirus Pandemic, Congress passed the CARES Act. The CARES Act recognized the SBRA’s debt cap was unrealistic. So, the CARES Act increased the cap to…Read More

Involuntary bankruptcy cases are where creditors file a petition to put a debtor into bankruptcy. They can be filed against individuals, as well as entities. When people think of an involuntary bankruptcy petition against an individual, celebrities and the fallen “well to do” come to mind. People don’t think of their neighbor, who defaulted their first or second mortgage a year or two ago. The Covid-19 pandemic has seen states restricting foreclosure actions. This is frustrating mortgagees holding mortgages where the debt exceeds the property’s value. So, they are using…Read More

People ask, “what’s involved in chapter 7 personal bankruptcy case?” Here’s a practical answer: Recognize the problem Investigate professionals Interview professionals Chose and retain professional Chose a course of problem-solving – alternatives to bankruptcy may be preferable Decide to file Determine the best time to file Prepare petition, schedules and statements Take mandatory pre-petition counseling File petition If an incomplete “emergency” petition was filed, finish and file schedules and statements (within 14 days of filing) Provide trustee with required documents (e.g. tax returns, pay stubs, bank records) Attend meeting of…Read More

Bankruptcy Code2 § 1307(b) has been called an “escape hatch”3 for “bad faith” Chapter 13 filers, facing creditors’ § 1307( c ) motions to convert their cases to Chapter 7. Those debtors assert § 1307(b)’s “absolute right”4 to voluntarily dismiss their case. But, “how can a debtor assert § 1307(b) if they don’t qualify for Chapter 13 relief?” Disqualified from Chapter 13 Access to Chapter 13 relief has specific requirements.5 Failure to satisfy any of these requirements denies debtors Chapter 13 relief.6 Dismissal vs. Conversion A debtor’s § 1307(b) motion…Read More

It’s official. The Coronavirus is having economic consequences. Business owners face falling sales. Workers face layoffs or shorter hours. Each of these means less funds to pay bills and expenses. So, what’s to do. As always, don’t panic. Similarly, whenever possible, don’t think . . . know. It requires a little more effort. But, the results are usually much better. Thinking of Bankruptcy Meanwhile, if you’re out of work and have bills to pay, don’t rush into bankruptcy. You want a fresh start, not a false start. Waiting may be the hardest…Read More

A client suggested I write the “Ten Commandments” of Chapter 11, responding to clients’ misperceptions and mis-expectations of the process. The time for those rules to descend from above1 arrived. They may not be “the” Ten Commandments. But they’re useful. I. THOU SHALT BE ALERT TO EVILS – Too many folks seek chapter 11 relief when it’s too late to save the venture. If a problem exists and the first turn-around effort failed, trying a second, without professional help may exhaust precious resources preventing a successful extraction from a death spiral. II.…Read More

You may have an identifiable problem that is killing your business or personal finances. The best example of this is owning property which is in foreclosure, or a problem venture with its own identifiable assets and secured creditors. Like a coyote in a trap; you’d bite off your leg to be free of it. That’s one possible bankruptcy strategy. Transferring the problem assets into a new entity which can reorganize in Chapter 11 to solve the problem, while the viable business continues outside of bankruptcy.[1] This solution presents its own…Read More

Federal Rule of Bankruptcy Procedure 2004 is one of the most powerful discovery tools around. A legitimate fishing expedition.[2] However, it has limits.[3] Imagine a Chapter 7 Trustee has a money judgment against the debtor in a bankruptcy case. The Trustee seeks Fed. R. Bankr. P. 2004 discovery from the debtor to enforce that money judgment. Should it fly? Fed. R. Bankr. P. 7069 incorporates Federal Rule of Civil Procedure 69 (“Rule 69”)[4] into bankruptcy cases. Rule 69 is the designated vehicle for conducted discovery to enforce judgments.[5] Fed. R.…Read More