Bankruptcy | United States Courts

About Bankruptcy

Filing bankruptcy can help a person by discarding debt or making a plan to repay debts. A bankruptcy case normally begins when the debtor files a petition with the bankruptcy court. A petition may be filed by an individual, by spouses together, or by a corporation or other entity.

All bankruptcy cases are handled in federal courts under rules outlined in the U.S. Bankruptcy Code.

There are different types of bankruptcies, which are usually referred to by their chapter in the U.S. Bankruptcy Code.

Bankruptcy Basics provides detailed information about filing.

Seeking the advice of a qualified lawyer is strongly recommended because bankruptcy has long-term financial and legal consequences. Individuals can file bankruptcy without a lawyer, which is called filing pro se. Learn more.

Use the forms that are numbered in the 100 series to file bankruptcy for individuals or married couples. Use the forms that are numbered in the 200 series if you are preparing a bankruptcy on behalf of a nonindividual, such as a corporation, partnership, or limited liability company (LLC). Sole proprietors must use the forms that are numbered in the 100 series.

If you need help finding a bankruptcy lawyer, the resources below may help. If you are unable to afford an attorney, you may qualify for free legal services.

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Bankruptcy | United States Courts

Bankruptcy Definition – Investopedia

What Is Bankruptcy?

Bankruptcy is a legal proceeding involving a person or business that is unable to repay their outstanding debts.The bankruptcy process begins with a petition filed by the debtor, which is most common, or on behalf of creditors, which is less common. All of the debtor's assets are measured and evaluated, and the assets may be used to repay a portion of outstanding debt.

Bankruptcy offers an individual or business a chance to start fresh by forgiving debts that simply cannot be paid while giving creditors a chance to obtain some measure of repayment based on the individual's or business's assets available for liquidation. In theory, the ability to file for bankruptcy benefits the overall economy by allowing people and companies a second chance to gain access to credit and by providing creditors with a portion of debt repayment. Upon the successful completion of bankruptcy proceedings, the debtor is relieved of the debt obligations that were incurred prior to filing for bankruptcy.

All bankruptcy cases in the United States are handled through federal courts. Any decisions in federal bankruptcy cases are made by a bankruptcy judge, including whether a debtor is eligible to file and whether they should be discharged of their debts. Administration over bankruptcy cases is often handled by a trustee, an officer appointed by the United States Trustee Program of the Department of Justice, to represent the debtor's estate in the proceeding. There is usually very little direct contact between the debtor and the judge unless there is some objection made in the case by a creditor.

Bankruptcy filings in the United States fall under one of several chapters of the Bankruptcy Code, including Chapter 7, which involves the liquidation of assets; Chapter 11, which deals with company or individual reorganizations; and Chapter 13, which arranges for debt repayment with lowered debt covenants or specific payment plans. Bankruptcy filing costs vary, depending on the type of bankruptcy, the complexity of the case, and other factors.

Individualsand in some cases businesses, with few or no assetstypically file Chapter 7 bankruptcy. It allows them to dispose of their unsecured debts, such as credit card balances and medical bills. Those with nonexempt assets, such as family heirlooms (collections with high valuations, such as coin or stamp collections);second homes; and cash, stocks, or bonds must liquidate the property to repay some or all of their unsecured debts. A person filing Chapter 7 bankruptcy is basically selling off their assets to clear their debt. People who have no valuable assets and only exempt propertysuch as household goods, clothing, tools for their trades, and a personal vehicle worth up to a certain valuemay end up repaying no part of their unsecured debt.

Businesses often file Chapter 11 bankruptcy, the goal of which is to reorganize, remain in business, and once again become profitable. Filing Chapter 11 bankruptcy allows a company to create plans for profitability, cut costs, and find new ways to increase revenue. Their preferred stockholders, if any, may still receive payments, though common stockholders will not.

For example, a housekeeping business filing Chapter 11 bankruptcy might increase its rates slightly and offer more services to become profitable. Chapter 11 bankruptcy allows the business to continue conducting its business activities without interruption while working on a debt repayment plan under the court's supervision. In rare cases, individuals can also file Chapter 11 bankruptcy.

Individuals who make too much money to qualify for Chapter 7 bankruptcy may file under Chapter 13, also known as a wage earner's plan. It allows individualsas well as businesses, with consistent incometo create workable debt repayment plans. The repayment plans are commonly in installments over the course of a three- to five-year period. In exchange for repaying their creditors, the courts allow these debtors to keep all of their property, including otherwise nonexempt property.

While Chapter 7, Chapter 11, and Chapter 13 are the most common bankruptcy proceedings, especially as far as individuals are concerned, the law also provides for several other types:

When a debtor receives a discharge order, they are no longer legally required to pay the debts specified in the order. What's more, any creditor listed on the discharge order cannot legally undertake any type of collection activity (such as making phone calls or sending letters)against the debtor once the discharge order is in force.

However, not all debts qualify to be discharged. Some of these include tax claims, anything that was not listed by the debtor, child support or alimony payments, personal injury debts, and debts to the government. In addition, any secured creditor can still enforce a lien against property owned by the debtor, provided that the lien is still valid.

Debtors do not necessarily have the right to a discharge. When a petition for bankruptcy has been filed in court, creditors receive a notice and can object if they choose to do so. If they do, they will need to file a complaint in the court before the deadline. This leads to the filing of an adversary proceeding to recover money owed orenforce a lien.

The discharge fromChapter 7 is usually granted about four months after the debtor files to petition for bankruptcy. For any other type of bankruptcy, the discharge can occur when it becomes practical.

Declaring bankruptcy can help relieve you of your legal obligation to pay your debts and save your home, business, or ability to function financially, depending on which kind of bankruptcy petition you file. But it also can lower your credit rating, making it more difficult to get a loan, mortgage, or credit card, or to buy a home or business, or rent an apartment.

If you're trying to decide whether you should file for bankruptcy, your credit is probably already damaged. But it's worth noting that a Chapter 7 filing will stay on your credit report for 10 years, while a Chapter 13 will remain there for seven. Any creditors or lenders you apply to for new debt (such as a car loan, credit card, line of credit, or mortgage) will see the discharge on your report, which can prevent you from getting any credit.

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Bankruptcy Definition - Investopedia

Bankruptcy – Nolo’s Free Legal Encyclopedia | Nolo

When bills become unmanageable, such as after a divorce, illness, or job loss, bankruptcy provides a filer with a financial safety net. It works by wiping out ordischarging qualifying debtcredit card balances, overdue utility bills, personal loans, gym memberships, and moreand giving the filer a fresh start. If youreconsidering filing for bankruptcy, youll want to learnwhat each chapter can and cannot do.

Individuals oftenfile for Chapter 7 bankruptcybecause its quick and doesnt require debtors to repay creditors. Higher-income earners who make too much for a Chapter 7 discharge canfile for Chapter 13 bankruptcy. Although a debtor must pay back some amount through a Chapter 13 repayment plan, Chapter 13 has other benefits, like preventing a home foreclosure or car repossession and reducing the amount owed on secured debt. Both bankruptcy chaptersstop harassing debt collectorsand put an end to wage garnishments, creditor lawsuits, and other collection actions.

Filing forbankruptcy will affect your credit score, but it will improve with timeand often far sooner than most filers expect. In fact, many people find that filing for bankruptcy repairs credit faster than would be possible otherwise.

Bankruptcy isnt just for individuals with consumer debt problems. Filing can benefit asmall business owner by minimizing personal liabilityafter a company closure or by helping a small business return to profitability.

Finally, no one wants to file for bankruptcy. If youneed bankruptcy helpbut have reservations, youre not alone. Not only have employerslaid off staggering numbers of workers due to the coronavirus outbreak, but companies large and small are closing at a record paceandmany businesses will seek bankruptcy relief. But thats not as bleak as it might seem. Each fresh startincluding yoursmoves the economy one step closer toward recovery.

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Bankruptcy - Nolo's Free Legal Encyclopedia | Nolo

The Truth About Bankruptcy | DaveRamsey.com

You did everything you could to avoid it. You cut back on spending. You sold stuff to make payments. Youve been eating rice and beans for months now. But even with all the work, youve come to one painful conclusionyou may need to file bankruptcy.

Bankruptcy is confusing, not to mention emotionally devastating. Its a serious decision, and we dont want you to have surprises along the way. Here are some things you need to know before you take the first step.

Related: If you need help right now, contact one of our financial coaches.

Bankruptcy is a court proceeding where you tell a judge you cant pay your debts. The judge and court trustee examine your assets and liabilities to decide whether to discharge those debts. If the court finds that you really have no means to pay back your debt, you declare bankruptcy.

Bankruptcy can stop foreclosure on your home, repossession of property, or garnishment of your wages. Bankruptcy cancels manynot allof your debts.

Bankruptcy doesnt clear:

When you file for bankruptcy, creditors have to stop any effort to collect money from you, at least temporarily. Most creditors cant write, call or sue you after youve filed. However, even if you declare bankruptcy, the courts can require you to pay back certain debts. Each bankruptcy case is unique, and only a court can decide the details of your own bankruptcy.

There are two main types of bankruptcy for consumers. Youve probably heard of them: Chapter 13 and Chapter 7.

Chapter 13 means the court approves a plan for you to repay some or all of your debts over three to five years. You get to keep your assets (stuff you own) and youre given time to bring your mortgage up to date. You agree to a monthly payment plan and must follow a strict budget monitored by the court. This kind of bankruptcy stays on your credit report for seven years.

Take control of your money with a FREE trial of a Financial Peace Membership.

Related: Dave explains where a Chapter 13 bankruptcy falls in the Baby Steps.

Chapter 7 means the court sells all your assetswith some exemptionsso you can pay back as much debt as possible. The remaining unpaid debt is erased. You could lose your home (or the equity youve put into it) and your car in the process, depending on what the court decides. You can only file Chapter 7 bankruptcy if the court decides your income is too low to pay back your debt. This type of bankruptcy stays on your credit report for 10 years.

Related: Dave explains the difference between Chapter 7 and Chapter 13 bankruptcy.

Youve probably heard of other types of bankruptcy, like Chapter 11. Its typically reserved for businesses. You may also hear of Chapter 12 bankruptcy, which is for farmers and fishermen.

For specific information about bankruptcy laws in your area, visit the United States Courts website. There youll find information on the process and where to find help in your area. There is a bankruptcy court for each judicial district in the United States90 districts in all.

Lets not sugarcoat it: Bankruptcy takes a huge emotional toll on a person. It ranks up there with divorce, loss of a loved one and business failure. Beyond the emotional impact, here are other effects of declaring bankruptcy:

Your bankruptcy becomes public domain.This means your name and other personal information will appear in court records for the public to access. Thats right . . . potential employers, banks, clients and businesses can access the details of your bankruptcy.

Filing bankruptcy is expensive.Filing fees for Chapter 13 bankruptcy will cost around $310 plus attorney fees, which can be anywhere from $1,500 to $6,000. For a Chapter 7 bankruptcy, youll shell out $335 for filing fees and $835 to $3,835 for an attorney.(1)

Buying a home could be more complicated.Unless you pay cash for a home, it could take one to four years before you qualify for a mortgage loan.(2)

Filing for bankruptcy is a big deal, so you dont want to go into the process blind. Here are some things you need to do before you take any action:

Make a list of all debts, from your mortgage to student loans to child support. For each of those debts, find paperwork to verify the amounts. If you talk to anyone (lawyer or financial coach), youll need this information.

Before you file, try your best to pay off your debt. Get on a bare-bones budget. Talk with creditors about lowering interest rates or getting better terms. Move to a smaller place. Get an extra job to pay the bills. You get the idea.

A financial coach can give you a different, unbiased perspective on your financial situation. They can talk with you about alternatives to bankruptcy and create a customized plan to get you out of the red. And they can give you encouragement and that extra kick in the right direction!

If youve done everything you can and still cant get your head above water, bankruptcy may be your only option. Filing is complicated and involves lots of paperwork and the potential for mistakes. Working with a pro is your best option for walking through the process.

No matter where you are on the spectrum of bankruptcyfrom thinking about filing to starting over after filingwe have the resources to help you establish life-long smart money habits. Here are three ways we can help:

First, if your family decides to file bankruptcy, well be here to help you during the process and give you the tools to restore your hope after your bankruptcy is discharged. Well never get angry with someone for filing bankruptcy. Its a difficult, emotional situation. We get that.

Second, if you havent filed yet, we have coaches available to meet with you to find a better option than bankruptcy if at all possible. Our ultimate goal is to help you find financial peace and change your family tree. Bankruptcy is a setback, but your situationno matter how badis never hopeless.

Third, if you think theres any possible way to avoid bankruptcy, wed like to introduce you to Financial Peace University: a nine-week online or group program that will teach you how to get out of debt the right way.

Daves #1 course has helped millions of people make a plan for their money, stop living paycheck to paycheck and beat debt for good. This works! Hurry, groups are starting soon. Take the first step to changing your future today!

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The Truth About Bankruptcy | DaveRamsey.com

Bankruptcy: How it Works, Types & Consequences – Experian

Bankruptcy is a legal process overseen by federal bankruptcy courts. It's designed to help individuals and businesses eliminate all or part of their debt or to help them repay a portion of what they owe.

Bankruptcy may help you get relief from your debt, but it's important to understand that declaring bankruptcy has a serious, long-term effect on your credit. Bankruptcy will remain on your credit report for 7-10 years, affecting your ability to open credit card accounts and get approved for loans with favorable rates.

Bankruptcy can be a complex process, and the average person probably isn't equipped to go through it alone. Working with a bankruptcy attorney can help ensure your bankruptcy goes as smoothly as possible and complies with all the applicable rules and regulations governing bankruptcy proceedings.

You'll also have to meet some requirements before you can file for bankruptcy. You'll need to demonstrate you can't repay your debts and also complete credit counseling with a government-approved credit counselor. The counselor will help you assess your finances, discuss possible alternatives to bankruptcy, and help you create a personal budget plan.

If you decide to move forward with bankruptcy proceedings, you'll have to decide which type you'll file: Chapter 7 or Chapter 13. Both types of bankruptcy can help you eliminate unsecured debt (such as credit cards), halt a foreclosure or repossession, and stop wage garnishments, utility shut-offs and debt collection actions. With both types, you'll be expected to pay your own court costs and attorney fees. However, the two types of bankruptcy relieve debt in different ways.

Chapter 7 bankruptcy, also known as "straight bankruptcy," is what most people probably think of when they're considering filing for bankruptcy.

Under this type of bankruptcy, you'll be required to allow a federal court trustee to supervise the sale of any assets that aren't exempt (cars, work-related tools and basic household furnishings may be exempt). Money from the sale goes toward paying your creditors. The balance of what you owe is eliminated after the bankruptcy is discharged. Chapter 7 bankruptcy can't get you out of certain kinds of debts. You'll still have to pay court-ordered alimony and child support, taxes, and student loans.

The consequences of a Chapter 7 bankruptcy are significant: you will likely lose property, and the negative bankruptcy information will remain on your credit report for ten years after the filing date. Should you get into debt again, you won't be able to file again for bankruptcy under this chapter for eight years.

Chapter 13 bankruptcy works slightly differently, allowing you to keep your property in exchange for partially or completely repaying your debt. The bankruptcy court and your attorney will negotiate a three- to five-year repayment plan. Depending on what's negotiated, you may agree to repay all or part of your debt during that time period. When you've completed the agreed repayment plan, your debt is discharged, even if you only repaid part of the amount you originally owed.

While any type of bankruptcy negatively affects your credit, a Chapter 13 may be a more favorable option. Because you repay some (or all) of your debt, you may be able to retain some assets. What's more, a Chapter 13 bankruptcy will cycle off your credit report after seven years, and you could file again under this chapter in as little as two years.

Throughout bankruptcy proceedings, you'll likely come across some legal terms particular to bankruptcy proceedings that you'll need to know. Here are some of the most common and important ones:

While bankruptcy can eliminate a lot of debt, it can't wipe the slate completely clean if you have certain types of unforgivable debt. Types of debt that bankruptcy can't eliminate include:

Perhaps the most well-known consequence of bankruptcy is the loss of property. As previously noted, both types of bankruptcy proceedings can require you to give up possessions for sale in order to repay creditors. Under certain circumstances, bankruptcy can mean losing real estate, vehicles, jewelry, antique furnishings and other types of possessions.

Your bankruptcy can also affect others financially. For example, if your parents co-signed an auto loan for you, they could still be held responsible for at least some of that debt if you file for bankruptcy.

Finally, bankruptcy damages your credit. Bankruptcies are considered negative information on your credit report, and can affect how future lenders view you. Seeing a bankruptcy on your credit file may prompt creditors to decline extending you credit or to offer you higher interest rates and less favorable terms if they do decide to give you credit.

Depending on the type of bankruptcy you file, the negative information can appear on your credit report for up to a decade. Discharged accounts will have their status updated to reflect that they've been discharged, and this information will also appear on your credit report. Negative information on a credit report is a factor that can harm your credit score.

Bankruptcy information on your credit report may make it very difficult to get additional credit after the bankruptcy is discharged at least until the information cycles off your credit report. Lenders will be cautious about giving you additional credit, and they may ask you to accept a higher interest rate or less favorable terms in order to extend you credit.

It will be important to begin rebuilding your credit right away, making sure you pay all your bills on time. You'll also want to be careful not to fall back into any negative habits that contributed to your debt problems in the first place.

Just as bankruptcy can hinder your ability to obtain unsecured credit, it can make it difficult to get a mortgage, as well. You may find lenders decline your mortgage application, and those that do accept it may offer you a much higher interest rate and fees. You may be asked to put up a much higher down payment or shoulder higher closing costs.

Rather than give up your home and try to get a new mortgage after bankruptcy, it may be better to reaffirm your current mortgage during bankruptcy proceedings. You would be able to keep your home, continue paying on your current mortgage free of other debts and stay in your current home.

When you're struggling with unmanageable debt, bankruptcy is just one solution; there are others to consider. Most will also affect your credit, but probably not as badly as a bankruptcy plus, these alternatives can allow you to keep your property, rather than having to liquidate it in bankruptcy proceedings.

Some bankruptcy alternatives you might consider are:

Be aware that whenever you fail to honor the debt-repayment terms you originally agreed to, it can affect your credit. That said, bankruptcy will still have a more significant negative impact on your credit than will credit negotiation, credit counseling and debt consolidation.

Whenever you fail to repay a debt as you originally agreed to, it can negatively affect your credit. Some types of debt relief come with consequences that are more damaging and long-term than others. Before you make any decision about debt relief, such as declaring bankruptcy, it's important to research your options, get reliable advice from a qualified credit counselor, and understand the impact your choices can have on your overall financial well-being.

Regardless of what type of debt relief you choose, you can begin taking better care of your credit immediately by putting simple, responsible, credit-positive actions into practice such as:

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Bankruptcy: How it Works, Types & Consequences - Experian

Hertz, JCPenney, JCrew join list of businesses filing bankruptcy – NBCNews.com

WASHINGTON When the history of the COVID-19 pandemic is written, there will be more than a few words devoted to the retailers the virus decimated as it pounded the economy. The last month, in particular, has brought bankruptcies from well-known brands with deep roots around the country. This weekend, Hertz, the rental car giant, joined the list.

But the impacts of the coronavirus are only half the story. In some cases, such as restaurants and travel companies, the virus is undoubtedly the primary cause of trouble, but in others it looks more like an accelerant gas on a retail fire that has been burning for quite some time.

The last month has been particularly noteworthy. In the space of just two weeks, some of the best-known brands in America declared they were entering Chapter 11 bankruptcy and closing outlets across the country.

Back on May 4, Golds Gym, the national chain of exercise facilities, announced it was headed to Chapter 11, a move affecting roughly 4,000 employees and 700 locations in more than 20 states. The company said it was planning to permanently shutter 30 locations. And J. Crew, the well-known purveyor of preppy attire, also filed for Chapter 11, a move affecting 500 locations and 13,000 employees in 44 states.

On May 7, Neiman Marcus said it was entering Chapter 11, directly affecting roughly 13,000 employees at 68 stores in 18 states. And on May 14, JC Penney, the long-beleaguered legacy retail giant with 850 stores in 49 states said the same thing, a move affecting some 90,000 employees.

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Those are some well-known names, but in some ways their bankruptcies may not be shocking. Gyms and clothing stores are exactly the kinds of businesses that the coronavirus lockdown seems designed to damage. Raising ones heart rate and sweating are at-home activities these days and apparel shopping is done with a few clicks of a mouse.

But even before May, there were signs of trouble for the brick-and-mortar commerce world this year.

Back in mid-February, Pier One entered Chapter 11, a move that affected roughly 970 locations and 18,000 employees scattered around the United States with some in Canada. Art Van Furniture, said it would be shuttering on March 8, affecting 3,000 employees and 169 locations around the Midwest. And on March 11, Modells, which claimed to be the oldest sporting goods store in America said it was entering Chapter 11, closing the doors of about 140 locations with 3,600 employees on the East Coast.

And even beyond retail, there were signs of trouble elsewhere in the economy. In January, Bar Louie, the trendy upscale chain of bar/bistros, announced it would begin a bankruptcy restructuring hitting 90 locations and 1,500 employees.

In other words, even before the COVID-19 pandemic hit the United States, there were signs that 2020 might not be shaping up to be a great year for merchants with real-world physical locations. Part of that may have been economic exhaustion. The post-Great Recession expansion had been unfolding for more than 10 years (since 2009) when 2020 arrived. Some retrenching may have been inevitable.

But on the retail side there was also the steady march of e-commerce, which has been battering brick-and-mortar stores especially hard for a decade now. Consider the numbers from recent years.

In 2018, retailers closed nearly 6,000 brick-and-mortar locations permanently, according to Coresight Research. In 2019, the figure was even higher, 9,300 locations were shuttered. And, of course, all of those closures had nothing to do with the coronavirus pandemic.

For months now, much of the COVID conversation has centered on how the pandemic might change the nation. How deep will the changes be? What will the post-pandemic United States look like, particularly economically?

But even before the virus, the nation and its economy were going through major changes. Keep in mind all those closures in 2018 and 2019 came as the economy was booming.

There is no question that the coronavirus is hammering the U.S. economy and that it is taking a toll on some healthy businesses and employers. But the biggest economic impact from COVID-19 may be that it is pushing the economy into the future much faster than before, striking hard at businesses that were already weak from other challenges.

It all serves as a reminder that even after the pandemic is controlled, the road back to normal is not going to be easy, and normal may look very different.

Dante Chinni

Dante Chinni is a contributor to NBC News specializing in data analysis around campaigns, politics and culture.

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Hertz, JCPenney, JCrew join list of businesses filing bankruptcy - NBCNews.com

Texas bankruptcies are up, and Houston is the epicenter – Houston Chronicle

The list is growing: J.C. Penney, Neiman Marcus, Diamond Offshore Drilling, Alta Mesa Resources, Echo Energy, Alta Petroleum, TriPoint Oilfield Services, Sheridan Holding and Stage Stores.

More Texas businesses are filing for bankruptcy this year than during the Great Recession or anytime in the past two decades, and legal experts said the wave of insolvencies and restructurings is still far from breaking or hitting their peak.

Between Jan. 1 and May 5, more than 545 Texas companies filed for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code up from 234 such filings during the same period in 2019, a 133 percent jump, according to new data provided exclusively to The Texas Lawbook by Androvett Legal Media & Marketing.

ENERGY CARNAGE: More than 240 U.S. energy bankruptcies forecast by 2021

And bankruptcy courts in the Southern District of Texas specifically Houston are the epicenter for the historic number of corporate restructurings expected to be filed this year. So far in 2020, five times more business bankruptcies have been filed in Houston than in any of the other three federal district courts in the state. The Northern District of Texas is a distant second.

There is a tsunami coming, said Foley bankruptcy partner Holly ONeil. For tens of thousands of retailers and restaurants and other businesses, their incoming revenue completely stopped, but their expenses kept coming. The options for many of these businesses are running out.

The Androvett data show that an average of 32 Texas companies has filed to restructure each week this year, compared with an average of 13 companies a week last year and 23 corporate bankruptcies each week in the first half of 2017, which was the previous high in the state.

If you are a restructuring lawyer, you are going to be very busy, said Lou Strubeck, head of the bankruptcy and restructuring practice at Norton Rose Fulbright. Oil and gas and the retail sector had a whole lot of stress even before COVID-19. The only surprising thing is that we havent seen the explosion of bankruptcy filings already. But they are still coming.

Several other prominent companies including CEC Entertainment and Chesapeake Energy are reportedly preparing bankruptcy filings.

I expect the volume will go up significantly. We are in the early stages, said Duston McFaul, a partner at Sidley Austin in Houston. This has the makings to be a long, several-year cycle with widespread imbalances to address.

The surge of bankruptcies by small-business owners also has been delayed because the stay-at-home orders have prevented owners from finding and meeting with lawyers to handle their filings.

Creditors are being patient with retailers and restaurants, at least for a short time, according to McFaul.

Lessors are not rushing to push out distressed businesses because theres currently no one lined up to replace tenants, he said. A strained revenue stream is better than none at all.

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The same is true in the oil industry, except that energy company restructurings tend to be significantly more complicated because there are so many parties and because the price of oil continues to be unstable.

Lenders arent going to be too aggressive in forcing energy companies into court to reorganize, Strubeck said, because they dont know what they would do with the assets and they dont want to run these companies.

The big question is, will private equity jump in or are they gun-shy about oil and gas? said Bill Wallander, a partner at Houston-based Vinson & Elkins.

Matthew Cavenaugh, a bankruptcy partner with Jackson Walker in Houston, said the answer to that question is a reason why courts may have seen fewer prepackaged bankruptcies and more free fall bankruptcies.

In 2015 and 2016, there was a lot of capital waiting to invest, which was important for exiting bankruptcy, he said. Right now, theres not a lot of access to capital.

Cavenaugh said there is another underlying factor that needs to be considered.

Theres been so much money pumped into the system by the feds, he said. Theres no way to know the impact.

For a longer version of this article, please visit TexasLawbook.net.

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Texas bankruptcies are up, and Houston is the epicenter - Houston Chronicle

Tuesday Morning will close some Idaho stores in bankruptcy – boisedev.com

Tuesday Morning declared bankruptcy Wednesday morning. The off-price home decor store filed court proceedings, telling a judge its struggles before the pandemic hit only grew worse in recent months.

The company says it hopes to stay in business, but will close nearly a third of its locations this summer. Tuesday Morning currently operates five stores in Idaho, and two in Boise.

[Penneys, Pier 1, Gordmans & more: chains shutter some stores what we know now about local outlets]

According to bankruptcy documents reviewed by BoiseDev, two of those stores will close in the first wave. Store locations in Pocatello and Idaho Falls will close, starting as early as June 1. The company and its debtors said they looked at store profitability, sales trends, geography and the possibility of renegotiating leases as factors in the stores it chose to close.

The first wave includes 133 locations. Two stores in Boise, on Boise Ave. at Apple St., and on Milwaukee St. will remain open. Tuesday Morning did say in filings that up to 100 additional stores could close depending on attempts to renegotiate lease agreements.

Tuesday Morning joins other retailers like Pier 1, JCPenney, Neiman Marcus, and J Crew in bankruptcy court in the wake of the pandemic. So far, just Pier 1 announced it would totally shut down, including its Boise locations.

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Tuesday Morning will close some Idaho stores in bankruptcy - boisedev.com

Related Chairman Stephen Ross: Expect a ‘flood’ of retail bankruptcies because of the pandemic – CNBC

Related Cos. Chairman Stephen Ross said the hotel and retail industries are being hit the hardest by the coronavirus pandemic, as travel has been dramatically curtailed and retail businesses have been forced to close up shop.

The crisis will force many retailers into bankruptcy, he said. That would add to a number of them, including department store chains Neiman Marcus, J.C. Penney and Stage Stores, and apparel maker J.Crew, that have already filed.

"You are going to have such a flood of cases going to the bankruptcy court," Ross told CNBC Tuesday morning during an interview on "Squawk Box."

"And these aren't really the type of bankruptcies that were induced by bad practices," he said. "It's really all driven by the pandemic."

In addition to malls and shopping centers, Related owns residential and office space across the U.S. In New York City, it operates the glitzy Hudson Yards mall and the Shops at Columbus Circle both of which remain shuttered as the city, the hardest hit in the nation, continues to employ drastic measures meant to curb the spread of the virus. Hudson Yards, notably, is anchored by the now-bankrupt Neiman Marcus.

Ross added he is most concerned about small business owners in the retail and restaurant business not being able to turn their lights back on. "Many of them probably don't have the wherewithal to reopen," he said.

The retail bankruptcy filings also threaten thousands of more workers in an economy that has already suffered tens of millions of lost jobs.

Meantime, Related's CEO, Jeff Blau, recently told CNBCthat many of the company's retail tenants had been deferring rent payments, as they try to work through the crisis.

By mid-April, he said Related had collected about 35% of April rents from its retail tenants overall. In its enclosed shopping malls, only about 20% of rent checks had come in, Blau said at the time.

Retail real estate landlords such as Simon, Brookfield and Macerich have been grappling with how to operate their businesses when rent is not being paid on time.

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Related Chairman Stephen Ross: Expect a 'flood' of retail bankruptcies because of the pandemic - CNBC

Bankruptcies have hit the fastest pace since the Great Recession and more companies are expected to file – Business Insider

Andrew Harnik / AP Images

The number of companies filing for bankruptcy has surged to a clip not seen since May 2009, following the Great Recession, Bloomberg reported Thursday.

In May, 27 companies with at least $50 million in liabilities filed for court protection from their creditors, according to the report. This group of companies, which includes a range from retailers J.Crew, JCPenney, and Pier 1 Imports to air carriers like Latam, represents the highest number of bankruptcy filings since the Great Recession.

The filings have increased as the sweeping lockdowns to contain the new coronavirus have devastated the US and global economy. Over a decade ago, in May 2009, 29 companies filed for bankruptcy, according to Bloomberg.

Read more: GOLDMAN SACHS: Buy these 25 stocks that are wildly popular with hedge funds and have crushed the market this year

The year-to-date picture tells the same story. So far in 2020, there have been 98 bankruptcies by major companies, the most since 142 companies filed in the first four months of 2009.

It's likely that the big bankruptcies will continue. Even as the US begins to reopen its economy, many companies will not have survived the shutdown, or won't be able to keep up with a hit to demand in the immediate future.

"I think we're going to continue to see filings of at least the level we're seeing for a while," Melanie Cyganowski, a former bankruptcy judge now with the Otterbourg law firm, told Bloomberg.

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Bankruptcies have hit the fastest pace since the Great Recession and more companies are expected to file - Business Insider

Which major retail companies have filed for bankruptcy since the coronavirus pandemic hit? Here’s the list. – NBCNews.com

From iconic department stores to entertainment giants, the coronavirus has seemingly spared no one in its devastation of the U.S. economy.

Falling consumer demand, reduced entertainment spending, and stay-at-home orders mandating certain businesses stay closed continue to take their toll on a retail industry that has been struggling for the past several years as consumers pivot to online shopping.

Even with the slow reopening of the economy as lockdowns beginning to lift, social distancing measures may continue for months. That will impact store capacity for retail and restaurants. For some businesses, these temporary changes could indicate bigger problems.

While bankruptcy doesnt inherently mean that a company will go out of business it's more a financial restructuring it does spell news of changes to come.

Heres a list of all the major companies to have filed for bankruptcy so far since the start of coronavirus.

Dean & Deluca

The New York City-based gourmet foods retailer filed for bankruptcy on March 31, one of the first businesses to show signs of trouble due to coronavirus impact. The company was founded in 1977 and was acquired by Pace Food Retail in 2014.

Apex Parks

Apex Parks, which owns and operates 14 family entertainment and water parks in New Jersey, California, and Florida, filed for Chapter 11 bankruptcy on April 8. A release from the company indicated that they do not intend to close.

FoodFirst, Bravo and Brio Restaurant Parent

FoodFirst Global Holdings, the parent company of restaurant chains Bravo Cucina Italiano and Brio Tuscan Grille, filed for Chapter 11 bankruptcy on April 10. FoodFirst acquired the brands in 2018.

True Religion Apparel

True Religion, a clothing brand known for its jeans, filed for Chapter 11 bankruptcy on April 13. The company, whose trendy denim rose to popularity in the 2000s, also filed for bankruptcy in 2017.

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CMX Cinemas

CMX Cinemas, a chain of movie theaters with dine-in options, filed for Chapter 11 bankruptcy on April 25. The theaters, owned by parent company Cinemex Holdings, was in the process of acquiring the Star Cinema Grill, a deal that was inked only six weeks prior.

Rubies Costume Company

Rubies, which manufactures costumes, wigs, and other festive gear, filed for Chapter 11 bankruptcy on April 30. Rubies claims to be the worlds largest designer and manufacturer of Halloween costumes.

J. Crew

The preppy retailer worn by celebrities and shoppers alike filed for bankruptcy on May 4. The company also owns Madewell, a womens clothing and accessory brand.

Golds Gym

Golds Gym, which owns and operates over 700 gyms in the U.S. and internationally, filed for Chapter 11 bankruptcy on May 4. The company said in a release they hope to be through the filing by Aug. 1, if not sooner.

Neiman Marcus

Luxury department store Neiman Marcus filed for Chapter 11 bankruptcy on May 7. The century-old retailer is one of several traditional department stores that could be headed for trouble.

Stage Stores, (Bealls, Goody's, Palais Royal, Peebles, Gordmans, and Stage Parent)

Stage Stores, which owns and operates almost 800 locations in smaller and more rural communities, filed for Chapter 11 bankruptcy on May 10. The brands sell a variety of goods, including apparel, cosmetics, and home goods.


Based in Plano, Texas, the retailer was founded more than a century ago as one of the countrys first department stores. But it has been on a downturn as people turn to online retailers and fast fashion to shop. JCPenney has faced financial trouble for several years, and filed for Chapter 11 on May 15. The retailer said it will announce the first phase of store closures in the coming weeks.

Pier 1 Imports

Home goods retailer Pier 1 Imports, which filed for Chapter 11 bankruptcy in February, announced May 19 that it is seeking bankruptcy court approval and plans to start a wind-down of business as soon as possible. The company was unable to find a buyer due to coronavirus impact. Pier 1 operates more than 900 stores nationwide.


The Hertz Corporation, known for its car rental services, filed for Chapter 11 bankruptcy on May 22. Hertz, which owns other brands including Dollar and Thrifty, underwent a CEO change last week, its fourth in six years.

Tuesday Morning

Discount homewares retailer Tuesday Morning filed for Chapter 11 bankruptcy on May 27. The Texas-based company operates almost 700 stores in 39 states.

This list will be updated on a weekly basis.

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Which major retail companies have filed for bankruptcy since the coronavirus pandemic hit? Here's the list. - NBCNews.com

How to navigate bankruptcy if the coronavirus wrecks your business – CNBC

For small businesses struggling to survive during the coronavirus crisis, bankruptcy may end up beckoning.

While overall filings were down in April, the number of businesses that filed Chapter 11 bankruptcy which involves reorganizing debt and remaining in operation jumped 26% from a year earlier. And according to some experts, it won't be too long before the floodgates open to expose a glut of small firms seeking relief.

"All I'm doing all day long is fielding calls from businesses with anywhere from $25 million in revenue down to $50,000 and operating out of their house," said Charles Bullock, a bankruptcy attorney and a founder of Stevenson & Bullock in Southfield, Michigan.

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"They aren't ready to file now, they're trying to make it through shutdowns and stabilize their business before they attempt to reorganize it [in bankruptcy]," Bullock said.

In the first three months of this year, there were 5,952 business bankruptcy filings overall, up 6% from 5,614 in the same period in 2019, according to the American Bankruptcy Institute. In April, although combined filings (individual and commercial) dropped by a whopping 46%, experts say temporary factors caused it: economic stimulus money aiding both small businesses and individuals, as well as a pause in bankruptcy-spurring actions such as evictions, foreclosures and creditor collections.

Of course, that patience for non-payment won't last forever. Experts expect business bankruptcy filings to rise in late summer, after loans from the Paycheck Protection Programrun out and expanded unemployment benefits end (scheduled for July 31).

"Everyone I've spoken with is simply waiting until this period abates," said Richardo Kilpatrick, managing partner at Kilpatrick & Associates in Auburn Hills, Michigan. "The pipeline is full."

While bankruptcy is not the only option for a struggling business a firm could just dissolve due to little or no debt and few assets, for instance those with obligations that become unmanageable may discover bankruptcy is the best way to move forward.

First, if you expect your business to remain viable in the long-term but need relief from creditors now, a new option under Chapter 11 may be appropriate. This route allows a firm to remain operational and, generally speaking, renegotiate its debt and repay over a set amount of time, as well as take other steps to return to profitability.

Called Subchapter 5, this new route it took effect in February is for businesses with debt below a certain threshold (with some limitations). From now through next March, that cap is about $7.5 million. (Recently passed legislation raised it from $2.7 million for one year.)

This option is intended to make the bankruptcy process faster and less expensive for small businesses. It eliminates some costs and paperwork requirements, as well as allowing owners to retain their interest in the business, among other differences from typical Chapter 11 cases.

Nevertheless, a Subchapter 5 filing still comes with a hefty price tag: about $10,000 to $50,000, depending on the complexity of the case, said Stuart Gold, managing partner at Gold, Lange & Majoros in Southfield, Michigan. The filing fee itself is $1,717.

Before you get to the point of filing, however, you should consult with a bankruptcy professional to make sure it makes sense.

"You want to make sure you have a viable business that can survive and is in need of relief to warrant the fees," Gold said.

Meanwhile, a Chapter 7 bankruptcy involves a trustee liquidating the filer's assets and paying off creditors to the extent possible. While this is a common route for individuals, it may not be suitable for a business entity because it won't erase the firm's debt, said Cara O'Neill, a legal editor for Nolo.com and bankruptcy and litigation attorney in Roseville, California.

"Most business owners are concerned primarily with getting out from under their liability for business debt, and that's better done using a personal Chapter 7 or Chapter 13 filing," O'Neill said.

Even if your business is its own legal entity and kept separate from your personal finances, owners who provided a personal guarantee on their business debt are still on the hook even if the company goes into bankruptcy.

In that case, the way to potentially avoid your personal assets being seized i.e., your house, car, savings, etc. is to also file for personal bankruptcy.

"We'll see both the individual and the corporation file bankruptcy to get a fresh start or [stop] collection of any debt."

Charles Bullock

Bankruptcy attorney and a founder of Stevenson & Bullock

"That happens all the time," said Bullock, of Stevenson & Bullock.

"It could be a medium-sized business where the ownership group has been forced to guarantee debt, or an individual owner where the debt is overwhelming," Bullock said. "We'll see both the individual and the corporation file bankruptcy to get a fresh start or [stop] collection of any debt."

Most individuals file under either Chapter 7 or 13, which have filing fees of a few hundred dollars, and enlisting an attorney can add $1,200 to about $3,500, depending on where you live and the complexity of your case.

Both methods stop collection activity like calls from creditors or debt collectors, wage garnishments and, potentially, lawsuits from creditors. (Court judgments already in place are trickier to get rid of in bankruptcy, as are some other types of debt including student loans.)

However, there are differences in who qualifies and how debt is treated in each option. Chapter 7 generally is for people who lack enough income to repay their debt and have little in the way of assets. It also is the most common way to file individual bankruptcy.

This approach quickly erases many forms of debt, including from credit cards, medical bills, personal loans and, potentially, those personal guarantees. It does not, however, necessarily stop your car from being repossessed or prevent home foreclosure.

Chapter 13 generally gives you three to five years to pay back certain debt and keep the asset (i.e., house or car). It also prevents creditors from garnishing your wages or putting a levy on your bank account. For this filing option, you must have income, and your debt (both secured and unsecured) must be below a certain amount (about $1.6 million total).

For individuals with debt above that threshold, Chapter 11 might be the best choice. This is the least commonly used option for individuals.

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How to navigate bankruptcy if the coronavirus wrecks your business - CNBC

Nearly a Third of Small, Independent Farmers Are Facing Bankruptcy by the End of 2020, New Survey Says – gvwire.com

It seems an oasis of good news in a desert of bad: Small farmers who saw restaurant sales evaporate and farmers market sales erode, in the wake of COVID-19, have found alternative ways to sell produce. They contribute to boxes sold by shuttered restaurants, sell their own boxes out of their trucks, even offer delivery. And theyre selling retail, not wholesale, so the moneys good.

If chef and restaurateur Dan Barber asks how theyre doing, the unanimous answer is, Great.

But Barber has only to look a few weeks down the road to see bad news coming. The current model wont survive the peak summer harvest, says Barber, who for 16 years has run the farm and restaurant Blue Hill at Stone Barns, about 30 miles northeast of New York City, in addition to the 20-year-old Blue Hill, in Manhattan. Unfortunately, he has numbers to back him up. ResourcED, a project he and his colleagues created to sell market boxes at both restaurants, has launched a survey of small farmers, concentrated at first in the Northeast but expanding coast to coast. Between 30 and 40 percent of them predict that they wont be able to keep up with increasing volume.

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Nearly a Third of Small, Independent Farmers Are Facing Bankruptcy by the End of 2020, New Survey Says - gvwire.com

JC Penney to reopen 153 stores as clock is threatening its bankruptcy reorganization – The Dallas Morning News

J.C. Penney is reopening stores in Texas, Florida, Indiana and Ohio on Wednesday as the clock is ticking in the largest bankruptcy filed since the coronavirus pandemic shut down the economy.

Details have emerged about the chains difficult path for exiting Chapter 11. Penney will attempt to spin off its real estate into a separate company and permanently close stores while its still trying to reopen locations.

Two big deadlines loom if Penney is going to exit in November, the date it put on a proposed timeline.

But time is limited to meet various steps, and triggers are built into the lending agreements to convert the bankruptcy to a liquidation, either on July 14 or August 15.

By mid-July, Penney has to persuade the lenders financing its bankruptcy to give it the next $225 million of the $450 million of debtor-in-possession financing that it secured and is required to enter a court-led restructuring. The lenders will release that money if they support Penneys business plan to exit bankruptcy, which has to be filed in June. Then, in August, if Penney doesnt have the support of lenders to finance the retailer when it leaves bankruptcy, the agreement calls for the bankruptcy to convert to a liquidation.

The companys biggest lenders include H/2 Capital Partners, Sixth Street Partners, KKR & Co. and Ares Management Corp. Some of the investors overlap with leveraged buyouts of other retailers that ended poorly over the past decade.

Until earlier this month, Sixth Street was funded by TPG, which was part of the group that sold Neiman Marcus in a 2013 leveraged buyout sale of the Dallas-based luxury retailer to a group led by Ares. Neiman Marcus filed for bankruptcy this month, as did another TPG-led leverage buyout, J.Crew.

H/2 Capital is hedge fund that invests in real estate.

KKR led the leveraged buyout of Toys R Us, which ended up liquidating in 2018.

Penney is working on its business plan, which hasnt yet been filed with the court, but a preliminary version was filed Monday with the Securities and Exchange Commission. Penney said in that filing that it could permanently close as many as 242 stores of its 846 stores. Most of those locations, or 192 stores, are in leased space, and the remaining 50 are in buildings owned by Penney.

Before the pandemic, the proposed go-forward fleet of 604 stores had higher average sales and higher profitable sales.

Also, Penney proposes in its plan to sell a 35% stake in a separate new real estate company to raise cash. Thats actually part of its lending agreement. It also said its going to sell and lease back distribution centers to raise more cash. The plan calls for Penney to issue new stock in addition to the equity in the real estate investment trust.

Penney owns a lot of real estate, and that property is likely drawing interest. Some stores in dying malls are finding new life as online fulfillment centers.

Amazon, which has already converted some former mall stores into online operations, is looking at Penneys, according to a report Monday in Womens Wear Daily. Penney also has 11 distribution centers that would be in demand by lots of retailers, not just Amazon, as the industry makes a secular shift online.

Joshua Sussberg, Penneys attorney, said during a hearing Saturday afternoon in bankruptcy court that the company will work around the clock to deal with all the issues.

I am very worried about this, and why Im having a hearing on a Saturday, said U.S. Bankruptcy Court Judge David Jones during the webcast hearing with 300 people on the line. The judge approved customary first-day motions that allowed Penney to continue paying employees, utilities and other operating expenses, including the honoring of gift cards.

Jones, who is also presiding over the Neiman Marcus bankruptcy case in Houston, reminded the lawyers, management, advisers, lenders and creditors on the call that retail bankruptcies have to move quickly regardless of the strength of the debtor.

I want to see this work. You have 85,000 people (Penney employees) depending on all of your skill sets and talents, Jones said.

A total of 153 of Penneys 846 stores will be open this week, including 34 stores in Texas, 12 in Florida, 7 in Indiana and 11 in Ohio.

A few more local stores will open but not all of its stores in Dallas-Fort Worth. Stores will open Wednesday in Frisco, Burleson, Mesquite, Rockwall, Sherman and Waxahachie. Arlington, Fairview and Alliance Town Center in Fort Worth have been open since earlier this month.

Penneys stores are opening with reduced hours Monday through Saturday from noon to 7 p.m. and Sunday from 11 a.m. to 6 p.m. Penney has added pandemic-related new practices and training, including additional cleaning and Plexiglass shields.

Heres the list of Texas stores reopening Wednesday:

Longview Mall 3550 McCann Rd Longview

South Plains Mall 6002 Slide Rd-Bldg A Lubbock

Ingram Park Mall 6301 Nw Loop 410 San Antonio

Cielo Vista Mall 8401 Gateway Blvd W El Paso

Meyerland Plaza 730 Meyerland Plaza Mall Houston

South Park Mall 2418 Sw Military Dr San Antonio

River Hills Mall 200 Sidney Baker St S (Hwy 16) Kerrville

La Palmera Mall 5488 S Padre Island Dr Ste 4000 Corpus Christi

Parkdale Mall 6455 Eastex Frwy Beaumont

Sunset Mall 6000 Sunset Mall San Angelo

Richland Mall 6001 W Waco Dr Waco

Barton Creek Square 2901 S Capitol of Texas Hwy Austin

Mall De Las Aguilas 455 S Bibb St Eagle Pass

Killeen Mall 2100 S W S Young Dr Ste 2000 Killeen

Valle Vista Mall 2006 S Expy 83 Harlingen

Victoria Mall 8106 N Navarro St Victoria

Post Oak Mall 1500 Harvey Rd College Station

Town East Mall 6000 Town East Mall Mesquite

First Colony Mall 16529 Southwest Frwy Sugar Land

Woodlands Mall 1201 Lake Woodlands Dr Ste 500 The Woodlands

Stonebriar Mall 2607 Preston Rd Frisco

Rolling Oaks Mall 6909 N Loop 1604 E San Antonio

Burleson Town Center 877 Ne Alsbury Blvd Burleson

Baybrook Mall 100 Baybrook Mall Friendswood

The Rim 17710 La Cantera Pkwy San Antonio

Memorial City 300 Memorial City Way Houston

The Crossing At 288 2500 Smith Ranch Rd Pearland

Tech Ridge Center 12351 N Ih-35 Austin

Southpark Meadows 9500 S Ih-35 Ste H Austin

Plaza At Rockwall 1015 E I 30 Rockwall

Waxahachie Crossing 1441 N Hwy 77 Waxahachie

Brazos Town Commons 24201 Brazos Town Crossing Rosenberg

Sherman Town Center 610 Graham Dr Sherman

Stonecreek Crossing 800 Barnes St San Marcos

These Texas locations are offering contact-free curbside pickup only:

North East Mall 1101 Melbourne Dr. Hurst

La Plaza 2200 S. 10th St Mcallen

Music City Mall 4101 E. 42nd St. Odessa

Broadway Square Mall 4401 S. Broadway Tyler

Twitter: @MariaHalkias

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JC Penney to reopen 153 stores as clock is threatening its bankruptcy reorganization - The Dallas Morning News

Employee Benefit Issues to Know In Bankruptcy – The National Law Review

Bankruptcy is a term that tends to instill images of For Sale or Everything Must Go signs posted in windows, but this often is not the case. In fact, a bankruptcy filing is one way for a business to refocus its efforts and reorganize.

Indeed, throughout history, many Fortune 500 companies have at some point filed for bankruptcy, successfully reorganized and prospered. For this reason, a good bankruptcy lawyer approaches the process as a surgeon with a scalpel (rather than a sledge hammer). A company that files Chapter 11 bankruptcy will, in most cases, be a debtor-in-possession, and its management and board will retain control of the company so it can continue to conduct business during the pendency of its reorganization. In order to assist employers in understanding some of the bankruptcy nuances, we have prepared this alert identifying some of the most important employment and employee benefit issues in US bankruptcy cases.

Bankruptcy affords distressed companies many types of relief, but none is more immediate and profound than the automatic stay. One of the principal purposes of bankruptcy is to allow a debtor to have a breathing spell a respite from creditor pressure so that it can assess its strengths and weaknesses, take stock of all obligations and develop a plan to pay creditors while moving forward as a restructured company (or perhaps sell its assets and wind down). The automatic stay is effectively a broad, nationwide injunction triggered immediately upon the filing of a bankruptcy petition that stops almost all actions and proceedings against a debtor or its assets. This includes employment-related and other litigations, foreclosures, collection actions, enforcement of judgments and actions to perfect liens granted before the bankruptcy was filed.

Critically, the automatic stay will only enjoin actions against the debtor on the basis of its pre-bankruptcy actions. For example, a plaintiff in a wrongful termination action will have to pause its litigation against its debtors former employer, and their claim will become a general unsecured claim in the bankruptcy that would be paid pro rata with other unsecured creditors. If, however, the debtor wrongfully terminates an employee after the filing of the bankruptcy petition, the automatic stay will not prevent that employee from suing the debtor for its post-bankruptcy conduct.

While a company that files for Chapter 11 bankruptcy has the ability to remain in possession of its operations, the Bankruptcy Code imposes many restrictions, which, if not addressed, will hamper business operations. Typically, a debtor files a series of first-day motions, which will ask for immediate temporary relief to allow operations to continue. Examples of such requests include asking for court approval to (1) continue using existing cash management systems, (2) continue customer programs, (3) continue using existing insurance and (4) address payment of pre-bankruptcy employee wages and benefits.

Specifically, any pre-bankruptcy wages and benefits that employees have earned but for which they have not been paid are claims against the estate, which ordinarily would require each employee to file a proof of claim and await administration of the bankruptcy prior to receiving payment. This delay would substantially disrupt operations within the company employees who are not paid may not come to work, hampering the reorganization effort. Recognizing the importance of paying employees, the Bankruptcy Code gives payment priority to employee wages earned in the 180 days prior to the case being filed, capped at US$13,650 per employee. Because employees have this priority right to payment and because paying employees is integral to maintaining its workforce, a debtor will file a first-day motion asking for court approval to pay in the ordinary course prebankruptcy employee wages and benefits up to US$13,650. Courts regularly approve this motion, sometimes even for amounts exceeding the statutory cap, if the debtor can make a compelling case. The first-day wage and benefits motion is critical to a debtors soft landing and smooth transition into bankruptcy.

Bankruptcy is necessarily disruptive to a companys operations and often results in substantial uncertainty; accordingly, companies in Chapter 11 often experience trouble retaining essential employees and top management. To prevent attrition at the most critical levels, debtors may seek to implement key employee retention plans (KERPs) and/ or key employee incentive plans (KEIPs). There was a time when courts would approve a KERP enhanced payment for simply sticking with company by deferring to the business judgment of the debtor. This was a relatively low standard of review, which resulted in a perception of abuse. Ultimately, this perception led to stricter standards.

Section 503(c) of the Bankruptcy Code was enacted to stop the travesty of high-level corporate insiders who walk away with millions while the companys workers and retirees are left empty-handed. Section 503(c) restricts retention or severance payments to insiders, which are intended solely to induce them to remain with the debtor. It also prohibits any such payments to insiders and others that are outside the ordinary course of business and not justified by the facts and circumstances of the Chapter 11 case. Under this stricter standard, KERPs are more difficult to justify, and it is even questionable whether long-standing pre-bankruptcy KERPs will be honored in bankruptcy, if they are primarily retentive in nature.

The introduction of 503(c) and the limits on KERPs have given way to a preference for KEIPs. Rather than retentive in nature, KEIPs are designed to reward an employee for performance. For a KEIP to withstand scrutiny, it must be viewed as a payment for value, rather than a payment to simply stay with the debtor. Any KEIP seeking to side-step section 503(c) requirements must establish performance goals such as successfully reorganizing the company, meeting sales targets, etc. KERP/KEIP analysis in the bankruptcy setting requires detailed considerations beyond the scope of this article, and a company considering bankruptcy should raise these issues with their restructuring counsel prior to filing a bankruptcy petition.

In addition to the automatic stay, another significant benefit of Chapter 11 is that it allows a debtor to assume or reject its existing executory contracts. Executory contracts are those where performance obligations remain for both parties such that failure to perform would be deemed a breach. During bankruptcy, the debtor is entitled to use its business judgment to decide whether to assume or reject any executory contracts to which it is a party. Provisions in those agreements purporting to prohibit or restrict such rejection are unenforceable.

If an executory contract is assumed, it reaffirms the debtors decision to continue with that agreement, and the debtor must cure all existing defaults. If an executory contract is rejected, the agreement is not terminated, but it constitutes a breach by the debtor, which will relieve the non-debtor party from performance, and any damage claim that arises from that breach is treated as a pre-petition general unsecured claim. A contract must be assumed or rejected as a whole (i.e., it is all or nothing). Note that, generally, the deadline to make the decision to assume or reject executory contracts is made toward the end of the bankruptcy case. Pending that decision, the parties to executory contracts are generally obligated to perform under the contract.

Employment agreements are often executory contracts subject to assumption or rejection by a debtor. Typically, employment agreements are not assumed during the pendency of a bankruptcy case because it is uncertain how a case will resolve, and a debtor will not know if it wants to keep on any particular employee (e.g., there may be changes in management).

However, it is not uncommon for a debtor to terminate an employee that is subject to an employment agreement. In that circumstance, the debtor will seek to reject the employment agreement, which ordinarily will give rise to claims for breach by the terminated employee. Employment agreements are not the only executory contracts impacting the debtors employment operation. Contracts for payroll services, outside human resource management, and even collective bargaining agreements, are also executory contracts that may be assumed or rejected.

Among a debtors contract rejection powers is the ability to seek to reject collective bargaining agreements (CBA). This is a uniquely powerful tool that can allow a debtor to renegotiate and restructure substantial legacy costs. In order to reject a CBA, section 1113 of the Bankruptcy Code requires the debtor to present the authorized representative of the bargaining unit with a proposal containing what the debtor believes are the necessary modifications to the CBA to ensure that all affected parties (e.g., debtor, creditors and employees) are treated fairly and equitably. The debtor must also give the bargaining unit all necessary information to assess the proposed modifications. Then, the debtor and the bargaining unit must engage in good faith negotiations for a reasonable period. If no deal is reached, the court can approve the CBA rejection so long as (a) the debtor has fulfilled the various requirements set forth above; (b) the court determines the bargaining unit has rejected the proposal without good cause; and (c) the balance of the equities favors rejecting the CBA.

Note that even if a CBA is rejected, the debtor is not relieved of its duty to meet and bargain with the union the union remains the representative of the employees.

The federal Worker Adjustment and Retraining Notification Act (WARN) requires covered employers to give 60 days advance written notice of certain plant closings or mass layoffs to affected employees. Covered employers for WARN purposes are those with 100 or more full-time employees. Notice is generally required when 50 or more full-time employees experience an employment loss due to a plant closing or mass layoff. Some states have their own versions of WARN laws as well.

If WARN compliance is not top of mind for a distressed company as it is managing to a possible bankruptcy filing, it needs to be. It is critical to address these issues, as remedies for failure to provide timely WARN notice includes back pay for the period of the violation plus penalties and attorneys fees. Post-petition WARN violations are at risk of being treated as administrative claims while pre-petition violations have the same priority as other wage claims.

There are provisions in the WARN statute allowing the employer to shorten the 60-day notice requirement but, importantly, not to be excused entirely from providing notice.

The faltering company exception applies to a plant closing (but not merely a mass layoff) where, at the time notice would have been required, the employer was actively seeking capital or business, which, if obtained, would have enabled the employer to avoid or postpone the shutdown and the employer reasonably and in good faith believed that giving the required notice would have prevented the employer from obtaining the needed capital or business.

The natural disaster exception applies when employment losses triggering notice are the direct result of natural disasters (e.g., floods, earthquakes, storms, droughts and similar effects of nature).

The unforeseeable business circumstances exception (which is the one that will likely be relied upon the most during the COVID-19 pandemic) applies if the closing or mass layoff is caused by business circumstances that were not reasonably foreseeable as of the time that notice would have been required. Reasonably foreseeable means probable, not just possible, which means an employer should constantly reassess whether this exception applies. Unforeseeable business circumstances include an unanticipated and dramatic major economic downturn or non-natural disaster, as well as a government ordered closing of an employment site that occurs without prior notice.

Importantly, however, even if one of the WARN exceptions applies, the employer is still required to give as much as notice as is practicable and at that time must give a brief statement of the basis for reducing the notification period. Distressed companies need to be aware of and monitor their notice responsibilities under WARN (and state WARN laws if applicable) early on and continually reassess whether (and how much) notice is needed throughout the bankruptcy process.

One of the more important concepts regarding employee benefits is the controlled group rules. Both the Internal Revenue Code (Code) and the Employee Retirement Income Security Act of 1974 (ERISA) aggregate different entities that are part of a controlled group for purposes of determining both overall compliance and liabilities related to various employee benefit rules. The following is a sample of various employee benefits rules that are impacted by the controlled group rules:

Controlled group members are jointly and severally liable for pension plan obligations, such as single employer pension plan liabilities, multi-employer pension plan liabilities (such as withdrawal liability) and pension plan termination premiums.

Obligations to offer continuation coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA).

The requirement to offer affordable healthcare coverage under the Affordable Care Acts employer mandate tax.

Prior to commencing a bankruptcy case, it is important to identify all members of the controlled group and their potential employee benefit plan implications. In other words, it might be important to be certain that all entities that are jointly and severally liable in a controlled group file for bankruptcy protection at the same time. There are generally two types of controlled groups a parent-subsidiary controlled group or a brother-sister controlled group.1

A parent-subsidiary controlled group exists when a parent company owns (directly or indirectly) at least 80% of another entity. Below is an example of a parent-subsidiary controlled group with Corporations A, B and C.

The second type of controlled group is a brother-sister controlled group, which is a bit more complicated than the parent-subsidiary controlled group. In the general sense, a brother-sister controlled group exists if both (1) the same five or fewer people own 80% of one entity and (2) the same five or fewer people together own more than 50% of another entity taking into account the ownership of each person only to the extent such ownership is identical with respect to each organization. The following is an example of the brother-sister controlled group analysis from the IRS:

Example: Adams Corp and Bell Corp are owned by four shareholders, in the following percentages:

In this example, the first test is met because the shareholders own 100% of the stock; however, a brother-sister controlled group does not exist because the second test is not met as shown by the following percentages:

When applying these rules, the Treasury Regulations provide certain ownership attribution rules. The application of the ownership attribution rules can result in a brother-sister controlled group if the ownership interest is deemed held by another.

One of the many considerations to take into account in a bankruptcy is how to handle pension plan liabilities. Prior to the introduction of 401(k) plans in the 1980s, many employers offered retirement benefits in the form of defined benefit pension plans. These pension plans can have significant underfunded liabilities. In addition, some pension plans were part of good faith negotiations between an employer and a union.

Similar to other employee issues discussed above, the automatic stay comes into play with respect to pension plan liabilities. As a reminder, the automatic stay applies to the debtor that filed and it would generally not apply to the pension plan and its underlying trust this is because the pension plan and trust are separate legal entities and are not debtors. However, it is often the case that a debtor is a plan sponsor or a participating employer. The automatic stay would not prevent a claim for benefits under the pension plan and underlying trust; however, the automatic stay could provide protection from the debtor being subject to Pension Benefit Guaranty Corporation (PBGC) liens and IRS funding deficiency excise taxes. Accordingly, it is important to identify the roles that a debtor may play with respect to a pension plan and to identify any outstanding pension plan liabilities prior to filing the bankruptcy.

A Chapter 11 debtor may seek to sell some or all of its assets. In most cases, this sale will take the form of an asset sale, such as a sale of a plant or facility. In rare cases, the sale will take the form of a stock/equity sale of the entity.

Similar to the non-bankruptcy setting, an asset sale ordinarily involves the termination of the employment relationship between the asset seller and the individuals employed at the plant/facility followed by the possible immediate employment of those individuals by the asset buyer. In that situation, the parties must be aware of what employee-related obligations are triggered, such as severance, payment of accrued vacation/paid time off, and obligation to offer COBRA coverage. In contrast, the employment relationship usually is not terminated in the case of a stock/equity sale. Therefore, it is important to keep in mind the structure of the sale.

This article discusses high-level employment issues in bankruptcy, but it is essential to understand that a debtors administration of its case is subject to oversight from various constituencies, such as the Office of the US Trustee, financial stakeholders and the statutory committee of unsecured creditors (the Committee). The Committee is established at the outset of the case and is composed of a group of unsecured creditors who serve in a fiduciary capacity for the benefit of all unsecured creditors. In a Chapter 11 case, as long as there are creditors willing to serve on the committee, a committee will be usually be formed. The Committee allows unsecured creditors to have a voice in a debtors case and influence the outcome, while ensuring that the interests of unsecured creditors are protected. It has standing to be heard in court on any issue and it has broad powers, which make it an effective watchdog and relevant constituent in the case. The Committee is permitted to hire professionals (including counsel) at the debtors expense.

A successful Chapter 11 case typically requires a debtor to build consensus among its various constituent groups. To accomplish this, regular consultation with the Committee is essential. For example, a proactive debtor might request Committee input before seeking court approval of a KERP or KEIP so that the debtor can negotiate terms and perhaps avoid an objection. Managing its stakeholder and various constituent groups requires a debtor to play a game chess, and it is through this lens it should analyze its options and strategy, including those impacting employment issues.

1 Note In addition to controlled groups, entities may be required to be aggregated if they constitute an affiliated service group. An affiliated service group exists where certain common ownership interests exist between two entities and employees of those entities perform services for the other entity.

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Employee Benefit Issues to Know In Bankruptcy - The National Law Review

A Third Option Beyond State Bailouts and Bankruptcy – Reason

Some states experiencing enlarged deficits due to Covid-19 are hoping for a bailout from Congress. Senate Majority Leader Mitch McConnell briefly suggests that state consider filling for bankruptcy as an alternative. Neither seems like a particularly attractive option, for a variety of reasons. But is there any alternative?

Professors John S. Baker Jr. and Robert T. Miller recently suggested a third option in theWall Street Journal, and it's not default. Perhaps counter-intuitively, they suggest the best approach for many states may be "more borrowing"albeit with contractual provisions that will make investors more willing to lend. They write:

States can put investors at ease by waiving their claim to sovereign immunity in the contract under which the bonds are issued. States routinely give such waivers, and courts enforce them.

States can do more. They can agree that the contract under which the bonds are issued will be subject to the law of another jurisdiction and that they themselves may be sued in courts of that jurisdiction. This helps attract investors, because just as creditors generally don't trust a court in a country with poor credit to enforce the terms of a bond contract against that country, many wouldn't expect, say, a California court to enforce a California bond contract. . . .

States could reduce the interest rates they would otherwise pay by providing bondholders with credit enhancements. The simplest one would involve offering some state property as collateral, which would require an additional waiver of sovereign immunity. Another would be to set up a "sinking fund," which would require the state to deposit a certain percentage of its tax revenue into a trust located in another jurisdiction for the benefit of bondholders.

Borrowing in the capital markets allows states to solve their own problems. It preserves states' sovereignty and avoids a federal bailout, which would perversely reward spendthrift states. Suddenly, states would have large real obligations enforceable against them, which would teach financial discipline.

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A Third Option Beyond State Bailouts and Bankruptcy - Reason

What Every Company Needs to Know About Insolvency, Workouts and Bankruptcy – Manatt, Phelps & Phillips, LLP

With economic disruption affecting almost every industry and sector around the globe, a wave of insolvency, bankruptcy and workout issues will almost certainly appear in the coming weeks and months. Companies and individualswhether as lenders, borrowers, investors, vendors, landlords/tenants, sellers/buyers or stakeholderswill be facing these issues directly and with other companies and individuals and will be required to navigate challenges as well as seek opportunities. Preparing today for how to respond and address these issues is essential.

Drawing upon decades of experience and lessons learned from previous economic downturns, Manatts team of bankruptcy, restructuring and distressed assets professionals will provide guidance during this 30-minute webinar on what to expect during this period of economic uncertainty and will discuss cross-industry considerations for addressing the obstacles and opportunities presented by it.

Topics to be covered include:

Even if you cant attend our live session on May 28, click here to register now and receive a link to view the program on demand.


Carl L. Grumer, Partner, BankruptcyIvan L. Kallick, Partner, BankruptcyRichard J. Maire, Jr., Partner, Corporate and FinanceGrace D. Winters, Partner, Manatt Real Estate (Moderator)

For regular updates on the major challenges companies are facing, please visit our COVID-19 resources page, and subscribe for timely updates in your inbox here.

Date and Time

Thursday, May 28, 20201:001:30 p.m. PT4:004:30 p.m. ET


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CLE credit is pending.

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What Every Company Needs to Know About Insolvency, Workouts and Bankruptcy - Manatt, Phelps & Phillips, LLP

Bankruptcies expected to soar, here’s what you need to know – WTVY, Dothan

Dothan, AL (WTVY)-- A longtime Dothan attorney predicts the number of bankruptcies will soar in the next few months as the economic fallout from coronavirus deepens. The average wage earner is facing such dire times, Collier Espy told WTVY on Tuesday.

The number of unemployed changes daily, but hundreds of thousands in Alabama have lost their jobs during the pandemic. More than a billion dollars in jobless benefits, the bulk coming from federal stimulus funds, have been paid to Alabamians in recent weeks.

Eventually, those payments, up to $875 weekly, will either run out or be reduced, forcing many to make tough decisions.

I would say three to five months from now we'll see lots of bankruptcy filings, Espy predicts. He said in his life, including over 40 years as an attorney, he's never seen things this bad.

His advice is to avoid bankruptcy, if possible, but also said sometimes there are no alternatives. In my opinion (bankruptcy is) like surgery. You don't want surgery but if there is a condition that it's recommended to get better then (you have) surgery.

For those unable to meet their monthly financial obligations, Espy suggests taking care of essentials first. He recommends keeping sufficient funds to pay for automobiles, groceries, and gasoline, and utilities. Credit cards can wait.

Generally speaking, lenders can't, at this time, foreclose on home mortgages and evictions are not permitted under emergency law. However, those restrictions likely won't last long.

Financial experts recommend working with lenders, many of whom have promised leniency for those experiencing financial difficulty.

Espy said, if bankruptcy is the only option there are several ways to file, including some that would allow repayment of debts but with more manageable terms.

Nationally, the jobless rate is estimated to range between 17 and 20 percent, the highest since the Great Depression.

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Bankruptcies expected to soar, here's what you need to know - WTVY, Dothan

Eye of the hurricane – America Inc faces a wave of bankruptcies | Business – The Economist

Editors note: The Economist is making some of its most important coverage of the covid-19 pandemic freely available to readers of The Economist Today, our daily newsletter. To receive it, register here. For our coronavirus tracker and more coverage, see our hub

YOU WILL get business failures on a grand scale. So declared James Bullard, president of the Federal Reserve Bank of St Louis, on May 12th. Peter Orszag, a former official in Barack Obamas White House and now with Lazard, an investment bank, warned that the American economy could face a significant risk of cascading bankruptcies. How bad will things really get for America Inc?

The country has already seen a surge of corporate bankruptcies among big firms that puts 2020 on track to be the worst year since 2009, at the height of the global financial crisis. In recent weeks well-known firms ranging from Neiman Marcus, a department-store chain, and J Crew, a clothing retailer, to Golds Gym, a glitzy workout group, have gone bust. Hertz, a giant car-hire firm, and Chesapeake Energy, a pioneer of Americas shale industry, are both on the brink of bankruptcy.

As the American economy sinks further in the coming months, many more firms are sure to get into trouble. This raises three questions. What early-warning signs might reveal the scale of the coming wave of bankruptcies? How does the looming disaster compare to the pain endured during the financial crisis? And are there meaningful alternatives to outright bankruptcy?

First, to harbingers of doom. One is the upheaval in the market for speculative grade (or junk) bonds. In America, two-thirds of non-financial corporate bonds are rated junk or BBB, the level just above junk. In April, Goldman Sachs, another investment bank, predicted that over $550bn of investment-grade bonds will fall to junk status by October (adding roughly 40% by current value to the junk-bond market).

Edward Altman of NYU Stern Business School reckons that about 8% of all firms whose debt is rated speculative grade (about 1,900 in all) will default in the next 12 months. This figure could reach 20% over two years. He expects at least 165 large firms, those with more than $100m in liabilities, to go bankrupt by the end of 2020.

A measure known as the distress ratio also highlights the problem. Distressed credits are junk bonds with spreads of more than ten percentage points relative to US Treasuries. S&P Global, a credit-rating agency, reckons that distressed credits as a share of total junk bonds in America had grown to 30% by April 10th, up from 25% on March 16th. Of the 32 worldwide junk-bond defaults in April, a level not seen since the financial crisis, 21 took place in America. S&P Global estimates that the 12-month trailing default rate for junk bonds in America increased to 3.9% in April, from 3.5% in March. In Europe it rose to 2.7% from 2.4%.

A wave of defaults might unfold with varying severity across different industries. Thanks to the collapse of the oil price as well as other troubles in the shale patch, almost 70% of the speculative-grade debt in the oil-and-gas industry is at distressed levels. Five other sectors have ratios of 35% or higher: retail and restaurants, mining, transport, cars and utilities (see chart).

The upshot is that a second, bigger wave of bankruptcies is on the cards. How would that compare to past troubles? At the peak of the financial crisis, the global default rate for junk bonds was 10%. Moodys, a credit-rating agency, predicts that if the current crisis is more severe than the financial crisis, as now seems likely, the default rate could rise to 20.8% (see chart). The coming bankruptcy wave could be worse than during the financial crisis because it will be more widespread, reckons Debra Dandeneau, a bankruptcy specialist at Baker McKenzie, a law firm. But she thinks it will take some months to arrive: Were in the eye of the hurricane now.

Another big difference to the financial crisis arises from uncertainty. The nature of this pandemic makes it impossible to know when the economy might return to normal. As William Derrough, a restructuring specialist at Moelis & Company, points out, Its very hard to value a company that doesnt have clear cashflow and visibility on its future markets. Jared Ellias at the University of California at Hastings argues that lenders dont know whether to restructure out of court, grant forbearance or insist on Chapter 11 bankruptcy when you have no idea when a firm will make money again. Worried about the coming deluge of cases, he organised a group of experts that last week petitioned Congress to appoint more bankruptcy judges and increase budgets for law clerks and other staff.

It will be very difficult for courts to keep up with the onslaught, says Judith Fitzgerald, a former bankruptcy judge now at Tucker Arensberg, a law firm in Pittsburgh. Amy Quackenboss of the American Bankruptcy Institute, an industry body, reports that members are busy, which will translate into more filings later on. Larry Perkins of Sierra Constellation Partners, a restructuring firm, thinks a legal bottleneck is absolutely possible unless courtrooms evolve to digest it. Vince Buccola of Wharton business school thinks part of the solution lies in embracing faster pre-packaged bankruptcy deals and debt exchanges (lenders agreeing to swap less onerous new debt for old unserviceable debt) done out of court.

A looming wave of bankruptcy cases points to the third question: how viable are the alternatives? There is good and bad news. The financial crisis saw a massive liquidity crunch and financial-sector implosion. But as Bruce Mendelsohn of Perella Weinberg Partners, an investment bank, observes, this crisis is the opposite. Capital markets are strong and open with many firms able to access capital from government or from markets, butthe fundamental operations of businesses are disrupted.

There is a flurry of activity among investors pouring money into so-called rescue funds. According to Preqin, a data firm, distressed-debt funds are looking to raise nearly $35bn. General Atlantic, a private-equity firm, is in the midst of raising nearly $5bn to invest in otherwise-healthy businesses squeezed temporarily by shutdowns. Bill Ford, General Atlantics boss, thinks that outside the retail sector, where many business models will prove unviable, most firms will try to avoid bankruptcy and seek rescue capital instead.

All restructuring firms are hiring, notes Michael Eisenband of FTI Consulting. He observes that there are more types of creditor today than during the financial crisis, so there is more opportunity to get liquidity into firms in different ways. He reckons few want to force liquidation because if you can kick the can down the road, maybe a vaccine comes andthere is a better chance of getting a recovery for creditors. Many hedge funds and non-traditional lenders (though not stodgy banks) are opting for debt-for-equity exchanges. That is so they get the upside when the economy recovers, says Thomas Salerno of Stinson, a bankruptcy lawyer.

So the good news is that many squeezed firms staring at bankruptcy might be saved through restructuring. Mr Derrough, a veteran of financial crises, explains that this involves five steps: stopping the bleeding; evaluating the injuries; performing the necessary surgery; rehabilitating the victim; and returning it to health. The bad news is that America Inc is at the start of phase one. As he puts it, Most of what we are doing is blood transfusions. We havent even gotten to stopping the bleeding.

Dig deeper:For our latest coverage of the covid-19 pandemic, register for The Economist Today, our daily newsletter, or visit our coronavirus tracker and story hub

This article appeared in the Business section of the print edition under the headline "Chapter 11s new chapter"

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Eye of the hurricane - America Inc faces a wave of bankruptcies | Business - The Economist

All the Fashion and Beauty Brand Closures and Bankruptcies Caused by the Pandemic – Fashionista

Photo: Spencer Platt/Getty Images

As we're all now well aware, the Covid-19 pandemic has been particularly tough on the fashion industry, with sales down across the board. And given that many companies especially those with more traditional business models were already struggling to adapt to a new retail environment or keep up with more digitally savvy competitors (remember: there were also plenty of bankruptcies and closures in 2019), the stay-at-home-orders were enough to fully decimate a number of them.

Some, like J.Crew and Neiman Marcus, declared bankruptcy, which typically means they're hoping some financial restructuring or a new investor couldultimately help them stay in business if they're lucky. Others have been forced to close up shop entirely.

From smaller brands without the cushion to weather a major drop in sales, to large retail chains that were saddled with debt before all this began, read on for a digital graveyard of all the fashion and beauty businesses that succumbed to the coronavirus and its negative impact on consumer spending. We'll keep updating this list as more of this bummer news emerges.

J.Crew: Debt-saddled J.Crew filed for Chapter 11 bankruptcy protectionMay 4. CEO Jan Singer described the decision as a financial restructuring and "a critical milestone in the ongoing process to transform our business with the goal of driving long-term, sustainable growth for J.Crew and further enhancing Madewell's growth momentum."

Neiman Marcus: With a reported $4.8 billion in debt, Neiman Marcusfiled for Chapter 11 May 7, saying in court documents that it expects to emerge from bankruptcy in the fall.

John Varvatos: On May 6, menswear brand John Varvatos filed for Chapter 11 bankruptcy protection, citing falling sales. The brand hopes to stay in business as it restructures its finances.

J.Hilburn: Another brand in the bankruptcy club as of May 6is J.Hilburn, a Dallas-based custom menswear retailer. The company employs stylists who work directly with customers in showrooms throughout the U.S., and hopes there will be no business disruption while it restructures its finances.

True Religion: The once-ubiquitous denim brand filed for bankruptcy for the second time in three years on April 13. It hopes to explore a sale or restructuring.

Bldwn: This Los Angeles-based contemporary brand (which originally launched as Baldwin in Kansas City and focused on denim) was an early victim of the pandemic, announcing a total closure March 25. According to a rep for the brand, investors decided to shut it down and all employees were let go.

The Modist: The Modist, an innovative online luxury retailer based in Dubai and focused on modest fashion, announced on April 2 it would be closing its doors permanently. According to the brand, the hit it took from the pandemic left it with no other options.

Elizabeth Suzann: On April 28, Nashville-based sustainable clothing brand Elizabeth Suzann announced that the company "as we know it" would be closing, with all employees leaving and its studio being vacated once existing orders were completed. Though, it sounds as if the founder could be back to work in some capacity by fall, TBD.

Anthom: New York designer boutique Anthom announced Friday, May 15 that it has permanently closed its brick-and-mortar doors. For now, it will continue operations online.

UPDATE, Monday May 18:

J.C. Penney: Long-struggling department store chain J.C. Penney filed for Chapter 11 bankruptcy protection on May 15. The company said it's working with its lenders on a restructuring plan to reduce debt and will explore a possible sale. It plans to continue operations and begin opening stores as it's deemed safe.

Centric Brands: This licensee company, which recently bought Zac Posen and produces products for Tommy Hilfiger, Under Armour, Calvin Klein and more filed for Chapter 11 on Monday May 18. It is working with lenders on a financial restructuring and plans to continue operations throughout the process.

UPDATE, Tuesday May 19:

Jeffrey: Nordstrom Inc., which bought a majority stake in the luxury boutique Jeffrey in 2005, has decided to permanently close all of its three locations. In turn, Jeffrey Kalinsky, who also acted as Nordstrom's designer fashion director, is retiring. According to the company, the decision to eliminate all Jeffrey stores as well as 16 Nordstrom stores was a response to the pandemic. In a statement, Kalinsky said: "Nordstrom has been an incredible partner to me and to the Jeffrey brand. While I'm disappointed in their decision to close Jeffrey stores, I understand it is the right decision for the business given the circumstances of this global crisis."

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All the Fashion and Beauty Brand Closures and Bankruptcies Caused by the Pandemic - Fashionista