As the U.S. economy continues to reopen, financial troubles for businesses and individuals are still here or looming. Many will be looking for debt relief, especially if the economy is slow to recover.From everything Im hearing, in a few months this situation is going to be really bad; the word some are using is tsunami, said Richard Cook, an attorney and owner of bankruptcy practice Cape Fear Debt Relief.Be Proactive Cook said that anyone struggling financially as a result of COVID-19 restrictions should take steps right away to avoid becoming overwhelmed.If you have a mortgage, contact your mortgage lender. Most monthly mortgage statements have the contact number, he said, noting that many mortgages, while they are serviced by a financial institution, are actually owned by a federal agency such as Fannie Mae, Freddie Mac, the VA, FHA or USDA.Forbearance options are there, Cook continued. And contact your other creditors. Car lenders are working with borrowers, pushing out repayments. Landlords may be different, but with the courts closed, [eviction] cases wont be heard right away. Landlords have no requirement to offer help, but if their mortgage debt is being temporarily adjusted, they might pass along that forbearance.Cook added that many credit card companies are offering some type of deferral.Forbearance is available also for federal student loan borrowers. However, Cook said, the key here is understanding that the term means temporary postponement and its important to look ahead at what happens when the forbearance period ends probably in three to six months. How should a person or business plan to dig out from all those deferred costs?Cook recommended that people looking at a deep well of financial problems contact a bankruptcy attorney. Many, he said, offer free consultations.Heres what not to do right now: Dont cash out your retirement, Cook said. If you do file for bankruptcy, your retirement account is protected from creditors.Wilmington attorney Algernon Butler III also emphasized that point. Its an unfortunate but well-intentioned impulse, when people or business owners see themselves or their company in financial distress, he said.In an effort to do what they believe is the right thing, they start withdrawing retirement funds to pay [debts]. But [retirement funds] are protected in bankruptcy. Your retirement account cannot be taken in a bankruptcy case, Butler said. Its almost always a mistake to fund a failing situation with retirement funds, but we see it all too often.Butler is a partner with the civil law firm Butler & Butler, which has a specialization in financial reorganizations, including bankruptcy. He thinks that individuals and small corporations in the Wilmington area will experience financial hardship as a result of how the country has reacted to COVID-19.I feel strongly that we need to responsibly permit businesses to reopen and get people back to work, he said. Unfortunately, some individuals and companies may find it in their best interest to consider, as one option, a bankruptcy reorganization.While I dont ever endorse bankruptcy as a first resort, I think that in emergency situations like this, where financial distress is out of someones control, then its wise to at least consider bankruptcy the pros and cons as something that may be in a persons or companys best interest to allow them to get back to being productive as soon as possible.Bankruptcy Chapters Butler added that bankruptcy offers some very powerful relief but it also involves some serious responsibilities.It can be complex and dangerous to navigate without a bankruptcy specialist, he said. Every situation, every set of facts is different.There are different types of bankruptcy processes, each with its own set of regulations and each detailed in a separate chapter of the bankruptcy code. Chapter 11, used most often by businesses, is designed to help an organization discharge its debts and get back on its feet.One of biggest things business owners misunderstand about bankruptcy is they think it means they will have to shut down, said Laurie Biggs, an attorney with New Bern-based firm Stubbs Perdue, which represents clients in Eastern North Carolina, including Wilmington. Its not a going-out-of-business sale. Chapter 11 is designed to help them restructure their debt and stay in business.Even individuals who have complex financial situations sometimes must file under Chapter 11, she added.In Chapter 11, the debtor must meet some minimum payment requirements, Biggs continued. You propose a plan based on what you can pay. My goal is always to help that business owner repay as much as they can, the way they can afford.Chapter 7 bankruptcy, on the other hand, often means total liquidation of a business, but can be a good way for an individual with few assets to pay off debts. It is a viable option for someone who does not own real estate or investments which would be taken to pay off debt but perhaps has a mountain of unsecured debt, such as credit card balances or medical bills.Chapter 7s generally discharge debt within six months, Butler said. You are in and out relatively quickly.And then there is Chapter 13, which is the option chosen by most individuals, he said.Chapter 13 is reorganization: If [people] need up to five years to repay or catch up with certain debts or taxes, and need a payment plan, Butler explained. Its a really simple, streamlined, economical personal reorganization.Recent Changes to RegulationsThe federal CARES Act, enacted in late March, made a change to Chapter 13, Butler explained.Any individuals who are currently in a Chapter 13 reorganization, which normally offers a repayment plan of up to five years, may extend their plan to up to seven years if they need to because of financial distress caused by the COVID crisis, he said. They can go back to bankruptcy court and ask for their plan to be extended. It gives them more flexibility to repay their debts.There has also been a significant recent change to Chapter 11 regulations that Butler said could really help a small business.Under the [2019] Small Business Reorganization Act there was a new type of Chapter 11 reorganization enacted in February of this year, he said, mentioning that this provision was contained in Subchapter V of the chapter. Not only is the Subchapter V bankruptcy process usually less expensive, but It is much easier for the corporate owners who must take their company into bankruptcy, and its less expensive for owners to retain their equity in the corporation after a plan is confirmed.Biggs said that Subchapter V removes many parts of Chapter 11 that dont work well for small businesses.In addition to making the process quicker and cheaper, she added, it removes some provisions that require all creditors to agree to the plan. Normally, in a regular Chapter 11 case, when you file a plan, all your creditors get to vote on it. If they dont agree, you have to go to court.In a Subchapter V, creditors either accept the plan or reject it, but they dont get to vote. It doesnt allow creditors to hold up the process through objections to the plan. [With Subchapter V, a small business] is avoiding big-corporation issues.In March, Congress made a further small-business friendly change. Originally, Subchapter V reorganizations could be used by businesses whose debts did not exceed $2.75 million. But that debt limit was raised to $7.5 million for one year, making more small businesses eligible for this streamlined, less expensive process.Special focus: Taking Care of Business
Read the original post:
A look at the bankruptcy option - Greater Wilmington Business Journal
- Alitalia Files for Bankruptcy, but Italy Balks at a Third Bailout - New York Times - May 3rd, 2017 [May 3rd, 2017]
- A Slow Bankruptcy Process Stops Locale-Reviving Jobs - Wall Street Journal (subscription) - May 3rd, 2017 [May 3rd, 2017]
- Bankruptcy auction for property of NASCAR artist Sam Bass ... - Charlotte Observer - May 3rd, 2017 [May 3rd, 2017]
- Obamacare helped make a 50% dent in personal bankruptcies ... - MarketWatch - May 3rd, 2017 [May 3rd, 2017]
- Pennsylvania Toy Seller Files For Bankruptcy - Wall Street Journal (subscription) - May 3rd, 2017 [May 3rd, 2017]
- Puerto Rico Enters Bankruptcy - Wall Street Journal (subscription) - May 3rd, 2017 [May 3rd, 2017]
- Puerto Rico Declares a Form of Bankruptcy - New York Times - May 3rd, 2017 [May 3rd, 2017]
- Farmer Mac Early Exclusive: Farm Bankruptcy Rates Low - AgWeb - June 6th, 2017 [June 6th, 2017]
- Washington weighs in on Westinghouse bankruptcy | News ... - Aiken Standard - June 6th, 2017 [June 6th, 2017]
- 4 Reasons Why Puerto Rico's 'Bankruptcy' Process Matters to US Residents - NBCNews.com - June 6th, 2017 [June 6th, 2017]
- Valeant: There Is Significant Bankruptcy Risk Here - Seeking Alpha - June 6th, 2017 [June 6th, 2017]
- Westinghouse bankruptcy draws federal scrutiny as VC Summer nuclear project's future remains unclear - Charleston Post Courier - June 6th, 2017 [June 6th, 2017]
- Bebe Avoids Bankruptcy Filing With Real-Estate Deals - Wall Street Journal (subscription) - June 6th, 2017 [June 6th, 2017]
- rue21 Bankruptcy Objections Filed - Bankrupt Company News (press release) (blog) - June 7th, 2017 [June 7th, 2017]
- ISH to emerge from bankruptcy as Seacor subsidiary - WorkBoat (blog) - June 7th, 2017 [June 7th, 2017]
- Curtains for the Pearl, as the Theater Company Files for Bankruptcy - New York Times - June 7th, 2017 [June 7th, 2017]
- Bankruptcy fraud earns Pepperell man 18 months | Boston Herald - Boston Herald - June 9th, 2017 [June 9th, 2017]
- Vikki Lindemuth favors appointment of trustee to handle husband's bankruptcy - Topeka Capital Journal - June 9th, 2017 [June 9th, 2017]
- Creditors seek to force bankruptcy of Tinley Park firm - Chicago Tribune - June 9th, 2017 [June 9th, 2017]
- Abengoa Bankruptcy Liquidation Plan Confirmed - Bankrupt Company News (press release) (blog) - June 9th, 2017 [June 9th, 2017]
- Retailer BCBG Unveils Going-Concern Bankruptcy Sales - Wall Street Journal (subscription) - June 9th, 2017 [June 9th, 2017]
- For Hartford, bankruptcy not an easy way out - The CT Mirror - June 9th, 2017 [June 9th, 2017]
- Why Students Should Be Able To Declare Bankruptcy On Their Loans - ATTN: - June 10th, 2017 [June 10th, 2017]
- Bankruptcy forces curtain to fall on community theater - Chicago Tribune - June 10th, 2017 [June 10th, 2017]
- Ex-Pepperell man jailed in bankruptcy case - Lowell Sun - June 10th, 2017 [June 10th, 2017]
- Owner of Joe's Crab Shack files for bankruptcy | Jacksonville News ... - Florida Times-Union - June 11th, 2017 [June 11th, 2017]
- Why test for bankruptcy law is a larger test for India - The Indian Express - June 11th, 2017 [June 11th, 2017]
- Tax trouble firms' most likely road to bankruptcy - Albuquerque Journal - June 12th, 2017 [June 12th, 2017]
- Darius Miles' Bankruptcy Sale Includes Signed LeBron James, Larry ... - Bleacher Report - June 12th, 2017 [June 12th, 2017]
- Winter Haven attorney gets prison for concealing assets in ... - News Chief - June 12th, 2017 [June 12th, 2017]
- Children's retailer Gymboree files bankruptcy, closing up to 450 stores - USA TODAY - June 12th, 2017 [June 12th, 2017]
- Another retailer has filed for bankruptcy - mySanAntonio.com - June 13th, 2017 [June 13th, 2017]
- Esperanza Unida bankruptcy delays city redevelopment efforts - BizTimes.com (Milwaukee) - June 13th, 2017 [June 13th, 2017]
- Square 1 Burgers files bankruptcy, blames over-saturated restaurant market - Orlando Sentinel - June 13th, 2017 [June 13th, 2017]
- Big KC manufacturer files for bankruptcy - Kansas City Business Journal - June 13th, 2017 [June 13th, 2017]
- Canadians Have Been Refinancing To Delay Bankruptcy - Seeking Alpha - June 13th, 2017 [June 13th, 2017]
- Gymboree Files For Bankruptcy, Plans To Close At Least 375 Stores - Forbes - June 13th, 2017 [June 13th, 2017]
- Sears, J. Crew, Claire's Are Bankruptcy Risks (SHLD) | Investopedia - Investopedia - June 14th, 2017 [June 14th, 2017]
- Tampa's Square 1 Burgers files for bankruptcy protection - Tampabay.com - June 14th, 2017 [June 14th, 2017]
- RBI, Banks And NPAs - First, Reform India's Bankruptcy Code, Then Force Defaulters Into It - Forbes - June 14th, 2017 [June 14th, 2017]
- Retail bloodbath: Bankruptcy filings pile up - CNNMoney - June 14th, 2017 [June 14th, 2017]
- Bankruptcy cases show we've become a nation of selective justice - New York Daily News - June 14th, 2017 [June 14th, 2017]
- Soupman of 'Seinfeld' Soup Nazi fame files for bankruptcy protection - USA TODAY - June 14th, 2017 [June 14th, 2017]
- Strack & Van Til bankruptcy case moved to Illinois - nwitimes.com - June 16th, 2017 [June 16th, 2017]
- Lawsuit: Wells Fargo revised mortgages in bankruptcy without permission - USA TODAY - June 16th, 2017 [June 16th, 2017]
- France's CGG files for bankruptcy protection - MarketWatch - June 16th, 2017 [June 16th, 2017]
- 'Soup Nazi' company files for bankruptcy - CNNMoney - June 16th, 2017 [June 16th, 2017]
- France's CGG Group Files for Bankruptcy Protection - Wall Street Journal (subscription) - June 17th, 2017 [June 17th, 2017]
- Company of businessman behind polo facility expansion files for bankruptcy protection - Fauquier Times - June 17th, 2017 [June 17th, 2017]
- Vehicles involved in Dusty Old Cars bankruptcy to be auctioned - WMUR Manchester - June 17th, 2017 [June 17th, 2017]
- Could Illinois be the first state to file for bankruptcy? - CBS News - June 17th, 2017 [June 17th, 2017]
- Takata Said to Ready Bankruptcy Filing Ahead of Sale to Rival - New York Times - June 17th, 2017 [June 17th, 2017]
- Greece escapes brush with bankruptcy but austerity still bites - FRANCE 24 - June 17th, 2017 [June 17th, 2017]
- Pawnbroker A-OK cites embezzlement in multimillion-dollar bankruptcy - Wichita Eagle - June 18th, 2017 [June 18th, 2017]
- Clock is Ticking on India's Bad Bank Debts Under Bankruptcy Laws - Bloomberg - June 18th, 2017 [June 18th, 2017]
- Surveyor dealing with fine, bankruptcy - Muncie Star Press - June 18th, 2017 [June 18th, 2017]
- Mode Media Assets Acquired by Wedding Ad Network BrideClick in Bankruptcy Deal - Variety - June 18th, 2017 [June 18th, 2017]
- San Bernardino officially out of bankruptcy - San Bernardino County Sun - June 20th, 2017 [June 20th, 2017]
- 22 retailers that are at serious risk of bankruptcy - Chron.com - June 20th, 2017 [June 20th, 2017]
- What to expect in defective air bag maker Takata's looming bankruptcy - USA TODAY - June 20th, 2017 [June 20th, 2017]
- Could Illinois file for bankruptcy? - FOX Illinois - June 20th, 2017 [June 20th, 2017]
- Exploding airbags: Takata shares plummet 17% on bankruptcy reports - CNNMoney - June 20th, 2017 [June 20th, 2017]
- These 14 Stores May Be on the Brink of Bankruptcy | NBC Southern ... - NBC Southern California - June 21st, 2017 [June 21st, 2017]
- Medical bankruptcies - WEAR - June 21st, 2017 [June 21st, 2017]
- After five long years, San Bernardino is officially out of bankruptcy. What's next? - Los Angeles Times - June 21st, 2017 [June 21st, 2017]
- Takata to file for bankruptcy Monday, SMFG to provide bridge loan: sources - Reuters - June 22nd, 2017 [June 22nd, 2017]
- Sears Canada files for bankruptcy - CNNMoney - June 22nd, 2017 [June 22nd, 2017]
- Foundation Healthcare Chapter 11 Bankruptcy - Bankrupt Company News (press release) (blog) - June 23rd, 2017 [June 23rd, 2017]
- Implant Sciences Bankruptcy Objections Filed - Bankrupt Company News (press release) (blog) - June 23rd, 2017 [June 23rd, 2017]
- Puerto Rico Bankruptcy: Uncertainty, But Also Stock Profit Opportunity - Seeking Alpha - June 23rd, 2017 [June 23rd, 2017]
- Lakeland day care files for bankruptcy without paying workers - wreg.com - June 23rd, 2017 [June 23rd, 2017]
- Sears Canada Closing 59 Stores as It Seeks Bankruptcy Protection - Fortune - June 23rd, 2017 [June 23rd, 2017]
- Takata to file for bankruptcy Monday, SMBC to provide bridge loan: Sources - CNBC - June 23rd, 2017 [June 23rd, 2017]
- How Sears Canada's Bankruptcy Impacts Sears Holdings Corp. - Seeking Alpha - June 23rd, 2017 [June 23rd, 2017]
- Augusta native sworn in as newest Bankruptcy Court judge - The Augusta Chronicle - June 24th, 2017 [June 24th, 2017]
- Takata reportedly planning to file for bankruptcy - CNBC - June 24th, 2017 [June 24th, 2017]
- Bankruptcy - money_selfhelp - June 24th, 2017 [June 24th, 2017]
- Japan press - Takata expected to file for bankruptcy protection in Tokyo - ForexLive - June 26th, 2017 [June 26th, 2017]
- Bankruptcy guru Edward Altman sees similarities to 2007 in the credit market today - Yahoo Finance - June 26th, 2017 [June 26th, 2017]
- Takata's woes expected to continue beyond bankruptcy filing amid mounting recall costs - CNBC - June 26th, 2017 [June 26th, 2017]