There is a tremendous amount of chatter these days about the long-term effect of the Covid-19 Economic Shutdown, with predictions that a great many of today’s small businesses will not be able to survive this cataclysmic event. While we all hope that reopening can safely be accomplished and that government assistance may be enough for businesses to hang on, the reality suggests that small business bankruptcies are headed for record numbers. We created a short list of questions to ask yourself if you are thinking about bankruptcy for your business. 

As a result of the Covid-19 Pandemic, Congress has emergently passed, and the President has signed legislation to provide for an economic stimulus and assist struggling Americans from the economic effects of this crisis. The CARES ACT (Coronavirus Aid, Relief and Economic Security Act)includes several provisions impacting existing and potential bankruptcy cases.

One of the stated purposes of the 2005 Bankruptcy Law revisions (BAPCPA) was to try to push more individuals into Chapter 13 repayment plans by compelling those with the “ability to pay” to do so. Congress adopted a “Means Test” Calculation whereby those with incomes above a certain level based on household size and the median income for the individual’s respective state would not automatically qualify to file basic Chapter 7 bankruptcy and such a filing would be deemed to be an “abuse.”

Effective February 19, 2020, the Bankruptcy Code will provide for a somewhat more compact and hopefully, easier version of Chapter 11 Reorganizations for Small Business Corporate and Individual Debtors. It is commonly referred to as a “Subchapter 5.”

It can be quite disheartening to listen to political leaders, the media and other reports as to how well the economy has rebounded since 2008, with record employment and sky-high stock numbers – yet at the same time realize you are living from paycheck to paycheck and things have never been tighter for you and your family.

In this firm, we pride ourselves on providing prospective debtors a fair and honest evaluation of the benefits and detriments of filing for Bankruptcy Protection. Most often, I encourage individuals to utilize bankruptcy when there is “no viable alternative that will result in the elimination of the debt over a finite and reasonable period of time at an affordable figure
per month."

A ritual of spring in America is about to begin. Tens of thousands of people will soon get their tax refunds, and when they do, they will finally be able to afford the thing they’ve thought about for months, if not years: bankruptcy.

As a consumer Bankruptcy attorney, I cannot recount how many times over my career I have heard these words, even though the need for Bankruptcy relief is compelling – if not overwhelming.

Ipso facto literally means "by that very fact" in Latin. It is an extremely important concept in Bankruptcy which if not recognized and enforced, could undermine the very protection of Bankruptcy itself.

Certainly a visit to a bankruptcy attorney would rank up there with one of the least anticipated appointments on a calendar.  However, like many type of medical visits, needless delay can be extremely costly or worse to the bankruptcy process.  As I say so often, it rarely gets better with time. 

The author of the expression that “nothing is certain but death and taxes” never spoke to a bankruptcy lawyer.  Contrary to what many think, taxes under certain circumstances can be discharged and eliminated in a bankruptcy filing.

This season brings out the best - and regrettably sometimes the worst in individuals. For example, in the effort to "enjoy the season" we often go overboard and spend well beyond our means which can create havoc just a few short months from now.

A Presidential election may have more impact on one’s daily life than you might guess. Look no farther than the 2004 Presidential election which returned George W. Bush to the White House with a sufficient Republican majority to pass through the 2005 Bankruptcy “Reform” Legislation which had been vetoed (pocket vetoed to be exact) by President Clinton in 1998 and stalled by the Democrats in the Senate during President Bush’s first term.

Why would someone voluntarily agree to repay a debt just discharged in Bankruptcy? Isn’t bankruptcy designed to eliminate debts? This concept of reaffirmation of debts, as permitted by 11 U.S.C. §524 (c) of the Bankruptcy Code has become one of the more vexing issues faced by bankruptcy counsel and debtors.

2+2 may not always equal 4. 

Depending on the type of plan, events may transpire post petition which could increase the amount necessary to satisfy the Chapter 13 obligations.  There may be additional administrative claims (for legal fees on application to the Court) or post petition creditor claims which could increase the amount necessary to fund the plan.