A bankruptcy judge on Tuesday gave troubled Tomball oil-field services company BJ Services seven days to continue operations and resume negotiations with lenders.

In his order, U.S. Bankruptcy Judge Marvin Isgur put pressure on BJ Services and creditors to return to the negotiating table to save as many jobs as possible and possibly prevent the death of the nearly 150-year-old company.

Unable to reach an agreement with lenders, BJ services filed for Chapter 11 bankruptcy Monday. Under the worst scenario, the case could end in a Chapter 7 liquidation in which the company would be dissolved, broken up and sold off in pieces with more than a thousand workers losing their jobs.

Downturn:BJServices files for Chapter 11 bankruptcy

"I am not prepared to walk away from 1,250 jobs on the first day of the case," Judge Isgur said.

BJ Services, which has oil well cementing and hydraulic fracturing crews deployed in shale plays across the United States and Canada, owes nearly $357 million to lenders and another $134 million to vendors. The company, already hit hard by the oil bust caused by the coronavirus pandemic, saw a $75 million deal that would have saved the company fall apart Thursday.

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Before filing for bankruptcy, BJ Services had offers on the table to sell its cementing business and part of its hydraulic fracturing business in two deals that would have saved more than 500 jobs. Judge Isgur, however, questioned bankruptcy liquidation sales as the only outcome for the case.

"I'm not prepared to limit the range of alternatives that are going to be discussed," Judge Isgur said. "If we're going to save jobs at the company, the company needs to be prepared to consider reorganization."

Read the rest here:

Judge gives BJ Services a week to find bankruptcy alternative - Houston Chronicle

As the coronavirus pandemic upends the restaurant industry, some chains that were already struggling financially have been pushed into bankruptcy.

Trade groups estimate that up to 30% of restaurants could permanently close because of the pandemic. While independent restaurants are more at risk, dining room closures and consumers eating more at home has also strained chains, particularly those in the casual dining sector.

The Paycheck Protection Program provided many restaurants, including large chains like P.F. Chang's and Five Guys, with much needed funds to continue operating. But coronavirus cases are once again surging, causing governors to once again close dining rooms to customers.

The crisis will likely change the restaurant industry forever. Experts say that the pandemic and related health concerns may prove to be the death knell for buffet-style restaurants, and the once-thriving "eatertainment" segment is under pressure.

A report from S&P Global Market Intelligence released on Friday identified 15 publicly traded restaurant chains that are most likely to default. Kisses From Italy, a casual dining chain whose shares are trading for 10 cents, topped the list, with a 41.2% chance of defaulting within the next 12 months. Muscle Maker, with a 36.9% chance of default, and Giggles N' Hugs, with a 34.3% chance, came in second and third place.

Starbucks, Denny's and Yum Brands made the S&P list with a much smaller probability of default in a year: all came in under 10%.

But franchisees of large fast-food chains are also struggling.Operators across chains like McDonald's, Wendy's and Yum Brands' Taco Bell received millions in PPP loans. NPC International, Pizza Hut's largest U.S. franchisee, filed for Chapter 11 on July 1 after struggling with its debt burden.

Here are the restaurant chains that have filed for bankruptcy during the pandemic:

A sign is posted on the exterior of a Chuck E. Cheese's restaurant on June 25, 2020 in Pinole, California.

Justin Sullivan | Getty Images

Chuck E. Cheese's parent company filed for Chapter 11 bankruptcy in late June, citing the prolonged venue closures stemming from the pandemic for its financial troubles. The chain had $1.91 billion in liabilities on its balance sheet, as of Dec. 29. The company plans to continue operating as it undergoes the bankruptcy process.

In 2014, private equity firm Apollo Global Management bought CEC Entertainment, which also owns Peter Piper Pizza.

An exterior view of a closed Sweet Tomatoes restaurant amid the spread of the coronavirus on May 10, 2020 in Las Vegas, Nevada.

Ethan Miller | Getty Images

The parent company of buffet-style restaurants Souplantation and Sweet Tomatoes filed for Chapter 7 bankruptcy in May and closed all of its locations permanently. Garden Fresh had an estimated $50 million to $100 million in liabilities, according to its bankruptcy filing. The following month, the company liquidated its assets.

A pedestrian wearing a protective mask walks past a closed Le Pain Quotidien restaurant in Arlington, Virginia, U.S., on Wednesday, May 27, 2020.

Andrew Harrer | Bloomberg | Getty Images

In late May, the U.S. arm of Le Pan Quotidien, PQ New York, sought Chapter 11 bankruptcy protection. The company had planned to file for bankruptcy prior to the pandemic, but restaurant closures nearly caused it to liquidate, according to court filings. PQ New York had an estimated $100 million to $500 million in liabilities when it filed for bankruptcy.

New York-based restaurant operator Aurify Brands bought all 98 U.S. locations of the restaurant and plans to reopen at least 35.

The logo of restaurant chain Vapiano is pictured at a restaurant in Berlin, on April 2, 2020.

Odd Andersen | AFP | Getty Images

In April, the German restaurant chain applied to start insolvency proceedings in Cologne. The company is publicly traded on the Frankfurt Stock Exchange and has six U.S. locations. When Vapiano went public in 2017, it had a market value of about 553 million euros, or more than $630 million.

West Palm Beach, CityPlace, Brio Tuscan Grille outdoor tables.

Jeff Greenberg | UIG | Getty Images

The parent company of Brio and Bravo restaurants filed for Chapter 11 bankruptcy in April and permanently shuttered 48 out of nearly 100 locations. FoodFirst said it had liabilities of $50,000 or less in its bankruptcy filing.

In June, Earl Enterprises, which owns Planet Hollywood and Earl of Sandwich, bought the two Italian restaurant chains in a deal valued at $30 million and plans to assume the leases of at least 45 locations.

Correction: An earlier version misidentified the source of the report. It was from S&P Global Market Intelligence.It also misstated the market value of Vapiano when it went public. It was worth more than $630 million.

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These restaurant chains filed for bankruptcy during the pandemic - CNBC

Travelport has entered a standstill agreement with its creditors, according to people familiar with the matter, as the parties haggle over a drop in the companys value since the start of the pandemic.

The travel technology company, which is co-owned by activist investor Elliott Management, has a deal to hold off lenders for a couple of months in a $1.15 billion dispute over alleged debt defaults. Creditors will refrain from making payment demands that could risk tipping the U.K.-based company into bankruptcy.

On the one side of the billion-dollar fight are the lenders, including GSO Capital Partners, Canyon Partners, and Mudrick Capital Management.

On the other is Travelport which provides ticketing and other services for travel agencies, airlines, and other companies and its shareholders, Evergreen Capital (an arm of Elliott) and private equity firm Siris Capital Group.

The existence of the agreement previously unreported should be reassuring news to Travelport employees and partners. It signals that Travelport will operate business as usual for the next couple of months. Creditors and management will haggle, with Travelport hoping lenders knock down the value of a broader array of outstanding loans worth about $2 billion to a smaller total amount, sources said.

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At a big-picture level, Travelport is working with what could approximately be considered two different buckets, worth about $500 million each. The first bucket of money comes from the companys existing access to liquidity and cash. The company has drawn at least $220 million from that bucket.

At risk is a second bucket of money thats also $500 million.

Some backstory, first: Maine-based payments tech firm Wex backed out in May from a planned $1.7 billion deal to buy Travelports shares in eNett and Optal, payment solutions providers.

The day after Wex said it wanted to drop the acquisition, Travelports private equity sponsors interpreted the terms of its credit documents to say it had the right to transfer Travelports intellectual property assets worth about $1.15 billion to a subsidiary beyond the reach of its secured creditors.

Travelports owners moved the assets to a new subsidiary, which they used as collateral to raise $500 million in new loans.

That additional liquidity could help keep the company out of bankruptcy and focused on its reorganization, slimming down, and tech modernization strategy. But the company may not need it if its 2020 revenue levels continue to follow the rebound theyve seen, sources familiar with the company speculated.

Some lenders call the move a trap door in the contract and allege that Travelports financial sponsors arent allowed to effectively remove Travelports intellectual property as loan collateral, sources said. Lenders have threatened to allege a breach of contract and other violations in lawsuits, sources said. Bloomberg News first reported in May that Travelports lenders had threatened to claim default.

The so-called trap door move isnt common and is considered by financial experts to be an assertive move. But it does have similar precedents in recent disputes between creditors and companies like J. Crew and Neiman Marcus.

A UK court has set a September trial date to decide if Wex can get out of buying eNett and Optal.

Travelport can continue to pursue its modernization strategy and service customers even if it loses that battle, sources familiar with the company said.

See full article

Photo Credit: A man wears a protective mask as he walks on Wall Street during the coronavirus outbreak in New York City, New York, U.S., March 13, 2020. Travelport is in a standstill agreement with its Wall Street creditors, holding off lenders until September in a $1.15 billion dispute over alleged debt defaults. Lucas Jackson / Reuters

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Travelport Strikes Deal With Creditors That For Now Could Save It From Bankruptcy - Skift

David R. Eastlake and Joshua A. Lesser, attorneys in the Houston office of global law firm Greenberg Traurig, LLP, have been elected to positions in the Bankruptcy Law Section of the State Bar of Texas.

HOUSTON, July 22, 2020 /PRNewswire-PRWeb/ -- David R. Eastlake and Joshua A. Lesser, attorneys in the Houston office of global law firm Greenberg Traurig, LLP, have been elected to positions in the Bankruptcy Law Section of the State Bar of Texas.

Eastlake was recently elected Secretary of the State Bar of Texas Bankruptcy Law Section. Eastlake had previously been serving on the Bankruptcy Law Section's Executive Council as an At-Large member. Eastlake will continue to serve on the Executive Council in his new role as an Officer.

Lesser was elected Membership Liaison for the Bankruptcy Law Section's Young Lawyers Committee.

July 1, 2020, marks the start of their two-year term.

"We are proud of David and Josh for their involvement with the Bankruptcy Law Section of the State Bar of Texas," said Shari L. Heyen, co-chair of the firm's Global Restructuring & Bankruptcy Practice and co-managing shareholder of the Houston office. "Greenberg Traurig encourages attorneys to continuously grow in their legal field, while being active and giving back to the community."

"We are honored to serve in our newly elected positions in the Bankruptcy Law Section, which aligns and educates those with similar professional aspirations. We welcome the challenge and are grateful to the Bankruptcy Law Section and Greenberg Traurig for affording us this opportunity," Eastlake and Lesser said in a joint statement.

According to their website, the goal of the Bankruptcy Law Section is to provide an opportunity for all practitioners of bankruptcy law licensed in Texas to meet and exchange information and ideas on a regular basis, including practitioners in both the consumer and business bankruptcy arenas, for those who represent creditors and debtors, and those who live in any geographic region.

Eastlake is a Shareholder in the firm's Restructuring & Bankruptcy Practice. He focuses his practice primarily on the representation of debtors in possession, official and ad hoc committees, significant creditors and secured lenders in complex Chapter 11 reorganization cases, Chapter 7 liquidations, out-of-court restructurings, and commercial and bankruptcy-related litigation matters. His representations have ranged across a wide array of industries, including energy, oil and gas, retail, manufacturing, real estate, financial services, health care, telecommunication and cable.

Lesser is an Associate in the firm's Restructuring & Bankruptcy Practice. He has represented corporate debtors, secured and unsecured creditors, and committees at all stages of corporate debt restructurings, Chapter 11 and Chapter 7 sales and liquidations, and out-of-court workouts.

About Greenberg Traurig's Restructuring & Bankruptcy Practice: Greenberg Traurig's internationally recognized Restructuring & Bankruptcy Practice provides clients with deep insight and knowledge acquired over decades of advisory and litigation experience. The team has a broad and diverse range of experience developing creative and effective solutions to the highly complex issues that arise in connection with in- and out-of-court reorganizations, restructurings, workouts, liquidations, and distressed acquisitions and sales. Using a multidisciplinary approach, the firm's vast resources and invaluable business network, the team helps companies navigate challenging times and address the full range of issues that can arise in the course of their own restructurings or dealings with other companies in distress.

About Greenberg Traurig, LLP Texas: Texas is important to Greenberg Traurig, LLP and part of its history. With more than 130 Texas lawyers in Austin, Dallas, and Houston, Greenberg Traurig has deep roots in the Texas business, legal, and governmental communities. Greenberg Traurig Texas works with clients to address their interdisciplinary legal needs across the state utilizing the firm's global platform. The Texas attorneys are experienced in industries key to the state's future, including: aviation, chemicals, construction, education, energy and natural resources, financial institutions, health care, hedge funds, hospitality, infrastructure, insurance, media, medical devices, pharmaceutical and biotechnology, real estate, retail, sports, technology and software, telecommunications, transportation, and video games and esports.

About Greenberg Traurig, LLP: Greenberg Traurig, LLP (GT) has 2200 lawyers in 41 locations in the United States, Latin America, Europe, Asia, and the Middle East. GT has been recognized for its philanthropic giving, diversity, and innovation, and is consistently among the largest firms in the U.S. on the Law360 400 and among the Top 20 on the Am Law Global 100. Web: http://www.gtlaw.com Twitter: @GT_Law.

SOURCE Greenberg Traurig, LLP

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David R. Eastlake and Joshua A. Lesser Elected to Bankruptcy Law Section of the State Bar of Texas Positions - Yahoo Finance

(Reuters) - Nearly a third of more than 40 large companies seeking U.S. bankruptcy protection during the coronavirus pandemic awarded bonuses to executives within a month of filing their cases, according to a Reuters analysis of securities filings and court records.

Under a 2005 bankruptcy law, companies are banned, with few exceptions, from paying executives retention bonuses while in bankruptcy. But the firms seized on a loophole by granting payouts before filing.

Six of the 14 companies that approved bonuses within a month of their filings cited business challenges executives faced during the pandemic in justifying the compensation.

Even more firms paid bonuses in the half-year period before their bankruptcies. Thirty-two of the 45 companies Reuters examined approved or paid bonuses within six months of filing. Nearly half authorized payouts within two months.

Eight companies, including J.C. Penney Co Inc and Hertz Global Holdings Inc, approved bonuses as few as five days before seeking bankruptcy protection. Hi-Crush Inc, a supplier of sand for oil-and-gas fracking, paid executive bonuses two days before its July 12 filing.

J.C. Penney - forced to temporarily close its 846 department stores and furlough about 78,000 of its 85,000 employees as the pandemic spread - approved nearly $10 million in payouts just before its May 15 filing. On Wednesday, the company said it would permanently close 152 stores and lay off 1,000 employees.

The company declined to comment for this story but said in an earlier statement that the bonuses aimed to retain a talented management team that had made progress on a turnaround before the pandemic.

The other companies declined to comment or did not respond. In filings, many said economic turmoil had rendered traditional compensation plans obsolete or that executives getting bonuses had forfeited other compensation.

Luxury retailer Neiman Marcus Group in March temporarily closed all of its 67 stores and in April furloughed more than 11,000 employees. The company paid $4 million in bonuses to Chairman and Chief Executive Geoffroy van Raemdonck in February and more than $4 million to other executives in the weeks before its May 7 bankruptcy filing, court records show. Neiman Marcus drew scrutiny this week on a plan it proposed after filing for bankruptcy to pay additional bonuses to executives. The company declined to comment.

Hertz - which recently terminated more than 14,000 workers - paid senior executives bonuses of $1.5 million days before its May 22 bankruptcy, in part to recognize the uncertainty they faced from the pandemics impact on travel, the company said in a filing.

Whiting Petroleum Corp bestowed $14.6 million in extra compensation to executives days before its April 1 bankruptcy. Shale pioneer Chesapeake Energy Corp awarded $25 million to executives and lower-level employees in May, about eight weeks before filing bankruptcy. Both cited fallout from the pandemic and a Saudi-Russian oil price war, which they said rendered their incentive plans ineffective.

Reuters reviewed financial disclosures and court records from 45 companies that filed for bankruptcy between March 11, the day the World Health Organization declared COVID-19 a pandemic, and July 15. Using a database provided by BankruptcyData, a division of New Generation Research Inc, Reuters reviewed companies with publicly trade stock or debt and more than $50 million in liabilities.

Such bonuses have long spurred objections that companies are enriching executives while cutting jobs, stiffing creditors and wiping out stock investors. In March, creditors sued former Toys R Us executives and directors, accusing them of misdeeds that included paying management bonuses days before its 2017 bankruptcy. The retailer liquidated in 2018, terminating more than 31,000 people.

A lawyer for the executives and directors said the bonuses were justified, given the extra work and stress on management, and that Toys R Us had hoped to remain in business after restructuring.

In June, congressional Democrats responded to the pandemic-induced wave of bankruptcies by introducing legislation that would strengthen creditors rights to claw back bonuses. The bill - the latest iteration of a proposal that has long failed to gain traction - faces slim prospects in a Republican-controlled Senate, a Democratic aide said.

Firms paying pre-bankruptcy bonuses know they would face scrutiny in court on compensation proposed after their filings, said Clifford J. White III, director of the U.S. Trustee Program, a Justice Department division charged with monitoring bankruptcy proceedings. But the trustees have no power to halt bonuses paid even days before a companys bankruptcy filing, he said, allowing firms to escape the transparency and court review.

The 2005 legislation required executives and other corporate insiders to have a competing job offer in hand before receiving retention bonuses during bankruptcy, among other restrictions. That forced failing firms to devise new ways to pay the bonuses, according to some restructuring experts.

After the 2008 financial crisis, companies often proposed bonuses in bankruptcy court, casting them as incentive plans with goals executives must meet. Judges mostly approved the plans, ruling that the performance benchmarks put the compensation beyond the purview of the restrictions on retention bonuses. The plans, however, sparked objections from Justice Department monitors who called them retention bonuses in disguise, often with easy milestones.

Eventually, companies found they could avoid scrutiny altogether by approving bonuses before bankruptcy filings. Dozens of companies have approved such payouts in the last five years, said Brian Cumberland, an executive compensation expert at consulting firm Alvarez & Marsal who advises companies undergoing financial restructurings.

Companies argue the bonuses are crucial to retaining executives whose departures could torpedo their businesses, ultimately leaving less money for creditors and employees. Now, some companies are bolstering those arguments by contending that their business would not have cratered without the economic turmoil of the pandemic.

The pre-bankruptcy payouts are needed, companies say, because potential stock awards are worthless and it would be impossible for executives to meet business targets that were crafted before the economic crisis. The bonuses ensure stability in leadership that is needed to hold faltering operations together, the firms contend.

Some specialists argue the bonuses are hard to justify for executives who may have few better job options in an economic crisis.

With double-digit unemployment, its a strange time to be paying out retention bonuses, said Adam Levitin, a professor specializing in bankruptcy at Georgetown Universitys law school.

J.C. Penney has not posted an annual profit since 2010 as it has struggled to grapple with the shift to online shopping and competition from discount retailers. The 118-year-old chain, at various points, employed more than 200,000 people and operated 1,600 stores, figures that have since been cut more than half.

On May 10, J.C. Penneys board approved compensation changes that paid top executives, including CEO Jill Soltau, nearly $10 million. On May 13, Soltau received a $1.7 million long-term incentive payment and a $4.5 million retention bonus, court filings show.

The annual pay of the companys median employee, a part-time hourly worker, was $11,482 in 2019, a company filing shows.

J.C. Penney filed for bankruptcy two days after paying Soltaus bonuses. At a hearing the next day, a creditors lawyer argued the payouts were designed to thwart court review. The payouts were timed so that they didnt have to put it in front of you, said the lawyer, Kristopher Hansen, addressing U.S. Bankruptcy Judge David Jones.

Jones - who is also overseeing the Whiting Petroleum, Chesapeake Energy and Neiman Marcus cases - told Reuters that such bonuses are always a concern in bankruptcy cases. That said, the adversarial process demands that parties put the issue before me before I can take action, he added, emphasizing he was speaking of general dynamics applicable to any case. A comment made in passing by a lawyer is not sufficient.

In its statement earlier this year, J.C. Penney said the bonuses were among a series of tough, prudent decisions taken to safeguard the firms future.

Dennis Marten - a shareholder who said he once worked at a J.C. Penney store - disagrees. He has appeared at court hearings pleading for an investigation of the companys leadership.

Shame on her for having the gall to get that money, he said of Soltau.

Reporting by Mike Spector and Jessica DiNapoli; Editing by Brian Thevenot

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On eve of bankruptcy, U.S. firms shower execs with bonuses - Reuters

The billionaire Sacklers who own Purdue Pharma, maker of the OxyContin painkiller that helped fuel Americas opioid epidemic, are among Americas richest families. And if they have their way, the federal court handling Purdues bankruptcy case will help them hold on to their wealth by releasing them from liability for the ravages caused by OxyContin.

The July 30 deadline for filing claims in Purdues bankruptcy proceedings potentially implicates not just claims against Purdue, but also claims against the Sacklers. The Sacklers may yet again benefit from expansive powers that bankruptcy courts exercise in complex cases.

So far, the bankruptcy court has granted injunctions stopping proceedings in several hundred lawsuits charging that Sackler family members directed the aggressive marketing campaign for OxyContin; it and other opioids have been implicated in the addictions of millions of patients and the deaths of several hundred thousand.

The Sacklers have offered $3 billion in the hope that the bankruptcy court will impose a global settlement of OxyContin litigation. Under this settlement, all claims against the Sacklers, even by families who lost loved ones to opioids, would be forever extinguished.

The Sacklers would walk away with an estimated several billion of OxyContin profits while leaving unresolved a crucial question asked by victims and their families: Did the Sacklers create and coordinate fraudulent marketing that helped make their best-selling drug a deadly national scourge? With that question left unanswered, many of those injured by OxyContin would feel victimized again.

In a bankruptcy filing, debts are forgiven discharged, in legal terms after debtors commit the full value of all of their assets (with the exception of certain types of property, like a primary home) to pay their creditors. That is not, however, what the Sacklers want, and indeed the members of the family have not filed for bankruptcy themselves.

What they propose instead is to be shielded from all OxyContin lawsuits, protecting their tremendous personal wealth from victims claims against them. Whats more, a full liability release would provide the Sacklers with more immunity than they could ever obtain in a personal bankruptcy filing, which would not protect them from legal action for fraud, willful and malicious personal injury, or from punitive damages.

Appallingly, legal experts expect the court to give the Sacklers what they want. The precedent is a 1985 case in which the A.H. Robins Company, the manufacturer of the Dalkon Shield contraceptive device, filed for bankruptcy protection.

Plaintiffs charged that members of the Robins family and others had fraudulently concealed evidence of the Dalkon Shields dangers. None had themselves filed for bankruptcy, but the court discharged all of them from liability.

The releases even went so far as to prohibit injured women from suing their doctors for medical malpractice claims. Other bankruptcy courts have since embraced this concept of a shield from liability for those who have not filed bankruptcy.

The Constitution vests only Congress with the power to enact bankruptcy law, the essence of which is prescribing by statute how much wealth a debtor must surrender to creditors in order to obtain a discharge. But Congress has never given a green light for the courts to create a liability discharge process for those like the Sacklers who have not submitted all of their assets to the control of a bankruptcy court by filing bankruptcy.

This extraordinary practice presents serious obstacles for those injured by OxyContin. If granted, it will be nearly impossible to get a full and transparent assessment of the Sacklers role in the opioid crisis without either the appointment of an independent examiner in the bankruptcy case or congressional investigations.

Allowing the bankruptcy court to impose a global OxyContin settlement may at first appear to be an efficient way to resolve litigation that could drag on for years. But the Sacklers will benefit from this expediency at the expense of victims.

At stake is whether there will ever be a fair assessment of responsibility for Americas deadly prescription drug epidemic. Protection from all OxyContin liability for the Sackler family would be an end-run around the reckoning that justice requires.

Gerald Posner (@geraldposner) is the author of Pharma: Greed, Lies and the Poisoning of America. Ralph Brubaker teaches bankruptcy law at the University of Illinois.

The Times is committed to publishing a diversity of letters to the editor. Wed like to hear what you think about this or any of our articles. Here are some tips. And heres our email: letters@nytimes.com.

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The Sacklers Could Get Away With It - The New York Times

By Cullen Browder, WRAL anchor/reporter

Raleigh, N.C. The coronavirus pandemic has wreaked havoc on North Carolina's economy:

WRAL Investigates found that those investments have paid off on at least one front so far personal bankruptcies are down in North Carolina. But that safety net could soon run out.

"We're seeing a big uptick in Chapter 11 filings, the corporate reorganizations," said Ciara Rogers with Campbell University's Norman Adrian Wiggins School of Law.

Rogers, who studies bankruptcy trends in North Carolina, said many of those companies were already on shaky ground before the coronavirus. Big brands like GNC, Brooks Brothers and Chuck E. Cheese recently filed for bankruptcy protection. Small businesses are also feeling pinched, she said.

"Some restaurants have started to file," she said.

Despite the struggling economy, there hasn't been a spike in consumer bankruptcy cases yet.

WRAL Investigates went through bankruptcy cases across North Carolina from mid-March, when restaurants were first shut down, to the end of June. During that time, there were 2,612 bankruptcy filings in North Carolina, compared with 3,683 during the same period last year.

"A lot of that has to do with the various federal, state and local government programs that are still helping people get through," Rogers said.

Those programs include the federal mortgage protection program, the Paycheck Protection Program, extended unemployment benefits and the extra $600 a week in unemployment that is set to on Saturday.

Rogers predicted personal bankruptcies could explode later this year if some of those programs aren't extended.

Congress continues to debate plans to extend relief.

One proposal in the Senate would continue the $600-a-week aid package but reduce it based on the unemployment rate in individual states. Protection on federally backed mortgages is also set to expire in September unless lawmakers take action.

Rogers said she hopes people have been smart with their money.

"That [extra unemployment benefit] allowed people to hopefully plan ahead and allow them to stay afloat for a little longer than they otherwise would have been able to do," she said. "What I think we'll see toward the end of 2020 is interest rates will remain low, but credit may become more unavailable or difficult to get, and that's going to push more people into bankruptcy."

With no end in sight for the pandemic, she said people need to look for financial solutions now.

"Don't stick your head in the sand," she said. "Now is the time to make those tough decisions. Now is the time to see if this business model you've been using is working."

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Unemployment is up in NC, but bankruptcies are down - so far - WRAL.com

This article was coproduced with Williams Equity Research.

At iREIT, we are on the cutting edge when it comes to REIT research, and this article is just one example of how we are taking our platform to an all-new level. If utilized correctly, technology can become a powerful differentiator for unlocking value in real estate, and this article is one such example. We hope you enjoy the timely content and thoughtful research report.

Source

Per Bloomberg, CBL & Associates Properties, Inc (CBL) is filing for bankruptcy. That's no surprise to our subscribers as we've been deterring curious distressed REIT prospectors from investing in the name for several quarters.

Before discussing updates pertaining to CBL, well put the rarity of this event into context by briefly reviewing the bankruptcy of General Growth Partners ("GGP"). With CBL's filing finalized, these two firms are the only recent equity REIT bankruptcies in the modern era.

For those interested in an in-depth analysis of CBL, please see our previous article. We will not rehash all the details.

CBL and GGP combined excessive leverage with mall properties of mixed quality.

Source: Q1 Supplemental Filing

CBL's properties are self identified at 20%, 34%, and 26%, Tier 1, 2, and 3 caliber properties, respectively.

Here's a quick summary from WERs previous work:

GGP went on a massive buying spree in the 2000s resulting in $25 billion in debt. As leverage ratios entered the teens, a figure that is unheard of in today's market, the CEO was removed but remained the Chairman of the Board. There is a long list of corporate governance failures within GGP's story. In 2009 and in the midst of the greatest modern liquidity crunch, GGP missed a $900 loan payment backed by two Las Vegas properties. By the time that occurred, GGP's stock was down 98%. Bill Ackman of Pershing Square, a name many of us are familiar with, owned a 25% stake in GGP prior to its demise. The resulting bankruptcy was and still is the largest in real estate history.

This led to a recapitalization and dissection of GGP's massive asset base.

By February 2010, the "smart money" arrived in the form of a $2.625 billion equity investment by Brookfield (BAM). These assets would later become the bedrock of Brookfield Property REIT (BRP) and Brookfield Property Partners (BPY). Despite the bad news and much in part due do Brookfield's investment in the troubled firm, GGP's creditors were paid in full with even equity investors receiving a favorable recovery rate. This is as rare as GGP's bankruptcy itself.

Firms we follow and have investments in were intimately involved.

GGP stayed around in one form or another until it was acquired by Brookfield Property Partners in August of 2018. Before the final transaction, GGP's leverage remained elevated and issues cropped up as a result. Brookfield diversified out of the properties by selling large stakes to TIAA and the CBRE Group.

Our continued financial analysis of CBL indicated that it was "highly likely" that not one, but multiple covenants had been breached by early Q2 of 2020. Given the disdain for mall properties by the public and private markets, our deep understanding of the firm's financial situation, and a struggling high yield credit market, our certainty that CBL would not remain solvent was nearly absolute.

A few days after our piece was published to subscribers, CBL warned on June 5 that "its ability to continue as a going concern is in doubt."

This announcement is because CBL did not pay an $11.8 million interest payment due June 1. An already tough situation was made impossible with government lockdowns, heightened concern surrounding big box department stores, and an accelerated shift toward online shopping.

With nearly 50 J.C. Penny stores (OTCPK:JCPNQ) in its portfolio, a retailer that recently declared bankruptcy itself and cut another 1,000 jobs a few days ago, and the collection of 25%-30% of rent in both April and May, CBL's fate was sealed.

In the midst of an active redevelopment campaign and saddled with mid-quality mall assets, CBL never really had a chance once governments began shutting down their local economies.

Source: Seeking Alpha

Speculators betting on equity REITs' nearly impeccable track record of avoiding Chapter 11 or Chapter 7 watched as CBL absorbed an 80% loss year-to-date. Investors often confuse a low dollar price with lower principal risk, a 50% loss is a 50% loss whether the stock falls from $1,000 a share to $500 or $1.00 to $0.50. In WERs experience, many individual investors' largest losses are on low dollar value stocks.

While performing institutional operational and investment due diligence on a variety of managers, WER obtains exceedingly rare behind-the-scenes understanding of how top asset managers function. This includes discovering these firms' competitive advantages and evaluating their durability over time.

Wide Moat Publishing (parent company of iREIT and Dividend Kings) recently established a business relationship with Orbital Insight, a leader in geospatial data collection and analysis. This type of resource is often called the "secret weapon" of hedge funds and private equity firms.

We had Orbital Insight aggregate cellular data associated with 62 CBL properties. This is a well-established strategy among more sophisticated institutional investors that we now incorporate into our process to the benefit of our subscribers.

With that introduction, let's evaluate the data pertaining to CBL and incorporate that into our updated outlook on commercial real estate and REITs.

Source: Orbital Insight

Keep in mind this data is derived from CBL's 62 properties located primarily east of the Mississippi River but concentrated in more affordable markets which exclude the likes of Chicago, New York, and New Jersey. CBL also has significant exposure to Texas

Source: Orbital Insight

Despite the diversification across over a dozen states, CBL's foot traffic completely evaporated between late February and mid March. After decreasing approximately 90% over that quick period, foot traffic quickly recovered to down 25% year-to-date. The nearly real-time data showed a quick retreat to down 60%-plus from early June through July 18. Well explore that decline in more detail.

Source: Q1 Supplemental Filing

For context, CBL's portfolio of malls maintained approximately 90% occupancy at the end of Q1 2020, in line with Q1 2019's statistics and making that variable fixed for most of the period. To better evaluate the contributors to the sharp changes in foot traffic, we need to close in on where the most valuable properties are by sales per square foot.

Source: Q1 Supplemental Filing

Based on reporting by the NYT, all states where CBL has key assets were fully locked down as of April 30. Let us move to July 21 and see what has changed.

Source: NYT

Outside of Florida, Texas, and Michigan, all the states where CBL has meaningful exposure are reopened or reopening. Given the complexity and randomness associated with states' economic policies due to the coronavirus, it's necessary to identify how individual sectors are impacted.

Source: NYT

Using this more granular data, effectively all the states where CBL has properties are open for retail stores and restaurants. While the sharp drop in foot traffic at CBL's malls occurred alongside the onset of widespread state lockdowns, the recent decrease in visitation doesn't correlate well with this variable. Investors expecting a rapid recovery in CBL foot traffic strictly due to the easing of lockdowns are likely to be disappointed.

Source: Orbital Insight

Every region showed a recent collapse in visits to mall properties independent of local policies. Other factors, such as news coverage, infection rates, and treatment availability may be more important at this stage.

Source: Orbital Insight

We can rule out asset quality as foot traffic has been effectively identical across Grade A, B, and C properties.

Source: Orbital Insight

Foot traffic in the states CBL has exposure are down significantly across the board. California and New Jersey stand out with the heaviest decreases (>60%) with Michigan, Wisconsin, and Minneapolis the next worst performing group (>47.5%). Coincidently or not, New Jersey has the highest mortality rate of any U.S. state (177 per 100,000 as of July 20th) with California leading the nation in total cases at 391,538 as of July 21.

While no definitive conclusion can be reached, it appears that the hard data on coronavirus infection and mortality rates is at least as important as government policy surrounding lockdowns. In fact, some of the states with the longest and harshest lockdown policies are among the worst performing even after the lockdowns are put in place. Logical arguments can be made on both sides, but as investors, our unemotional take is to remain skeptical about any one variable saving or destroying foot traffic at retail real estate.

What CBLs One Bright Spot Tells Us

Source: Orbital Insight

This chart is year-to-date with each column representing a week's worth of data. The rows are CBL's individual properties. The chart completely changes in the second week of March as blue goes to dark orange reflecting a major drop in foot traffic from Orbital Insights cellular geospatial data. That's not too surprising but let's zoom in on that one bright spot.

Source: Orbital Insight

Interestingly, CBL's outlet centers standout as the strongest performers. These properties experienced way above average visitation rates throughout June and the first week of July. These numbers collapsed again during the second week of July but fared much better than the enclosed properties.

This suggests two potential considerations: i) There's pent-up demand for physical retail shopping and ii) outlet centers, with much lower population densities and greater separation between shoppers, seem uniquely positioned to outperform while coronavirus fears still percolate society.

We will be using Orbital Insight research for a granular research report on Tanger Outlets (NYSE:SKT) and other mall REITs - stay tuned.

This article was previously published for iREIT on Alpha members.

Author's note: Brad Thomas is a Wall Street writer, which means he's not always right with his predictions or recommendations. Since that also applies to his grammar, please excuse any typos you may find. Also, this article is free: Written and distributed only to assist in research while providing a forum for second-level thinking.

We just launched iREIT Earnings Headquarters:

* Limited to first 100 new members * 2-week free trial * free REIT book *

Disclosure: I am/we are long SPG, SKT, BPYU. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Excerpt from:

The First REIT Bankruptcy Since 2009, A New Institutional Data Source, And Our Updated Sector Outlook - Seeking Alpha

Recent revisions to the U.S. Bankruptcy Code might open the door to headaches and heartaches for landlords that rent to small businesses.

In August 2019, Congress created whats known as Subchapter 5 of the Bankruptcy Code. Subchapter 5 is designed to streamline the Chapter 11 bankruptcy process for small businesses and slash their legal bills, according to Robert Dremluk, a partner in the New York City office of law firm Culhane Meadows Haughian & Walsh PLLC who specializes in bankruptcy cases.

Subchapter 5 went into effect this February. A month later, Congress tweaked Subchapter 5 as part of the federal CARES Act, aimed at helping the U.S. recover from the coronavirus pandemic. A major change in Subchapter 5 that will be on the books till next spring raises the cap on secured and unsecured debts for a small business to qualify for Chapter 11. The threshold jumped from a little over $2.7 million to $7.5 million. The idea was to create an easier path for companies to reorganize, Dremluk says.

Legal observers say the re-engineered Subchapter 5 could invite even more small businesses to file for Chapter 11 bankruptcy reorganization and, therefore, entangle more landlords in bankruptcy proceedings.

Other provisions of Subchapter 5 might also entice small businesses to head to bankruptcy court. They include:

The debtor-friendly Subchapter 5 makes no mention of landlords, notes Katey Anderson Sanchez, a bankruptcy attorney in the Phoenix office of law firm Ballard Spahr LLP. However, she adds that some businesses that in the past might have shied away from Chapter 11 bankruptcy now might find this path more worthwhile. In turn, that could put more landlords in the crosshairs of small business bankruptcies. How so? For one thing, Subchapter 5 weakens the power of a landlord or any other creditor to stop a reorganization plan from being finalized.

Sanchez notes, though, that landlords retain a lot of rights in Chapter 11 cases filed by tenants. She sees nothing in the Subchapter 5 language itself that should give a debtor a definitive edge over a landlord.

Landlords are in a really good position to say, Hey, you know youve got to pay us, Sanchez says. Theres no additional ability for a small business owner to change the terms of a lease or anything like thatnot any more than there is any other chapter of the code.

Through the lens of Subchapter 5, Dremluk sees some positives for landlords. Primary among them is that letting a small business restructure its debt under Subchapter 5 means that a tenant might stand a better chance of keeping its doors open and keeping up with its lease obligations, he notes. He adds that Subchapter 5 paves the way for more small businesses to negotiate with landlords, since some cash-strapped tenants previously found it too expensive to plow through the Chapter 11 bankruptcy process.

From his perspective, Neal Salisian, founder and co-managing partner of Los Angeles law firm Salisian Lee LLP, says the recent changes in the Bankruptcy code could lead to debtors leases being ripped up. He frequently represents commercial real estate landlords and lenders.

The way that would work is that the tenant could be in a particular space, not paying rent during a moratorium, and have other financial issues during that time that result in a bankruptcy filing. At this point, the whole lease would fall under the proceedings and likely get invalidated, Salisian says. Ultimately, this could be very bad combination of factors for a landlord, leading to months and months of unpaid rent and unoccupied space.

The result of that sort of scenario could be bankruptcy declarations on the part of the landlords themselves, Salisian says.

It remains to be seen how widely Subchapter 5 will be used by small businesses, according to Rory Vohwinkel, a bankruptcy attorney with Las Vegas law firm Vohwinkel & Associates Ltd. For the most part, small businesses are holding off on bankruptcy filings due to uncertainty over their current and future finances, attorneys say. However, legal observers anticipate a near-tsunami of small business bankruptcies to start when that uncertainty subsides.

Once those impediments go away, I think youll see an upsurge in the use of Subchapter 5, Dremluk says. I think a lot of small businesses that have hung on though COVID will see this as an opportunity to clean up their balance sheets, reorganize their business and go forward. But currently, the environment is not really suitable for that.

Vohwinkel and other attorneys are closely watching a Chapter 11 case thats already being pursued under Subchapter 5. Texas-based restaurant chain Texas Root Burger hopes to reorganize through Chapter 11 and to walk away from some of its locations, the Wall Street Journal reported. The newspaper points out that Subchapter 5 might force creditors like landlords to quickly head to the negotiating table with tenants that have filed for bankruptcy under Chapter 11.

We are all waiting to see how that case proceeds, as it could be precedent-setting, Vohwinkel says.

As the business community at large adopts a wait-and-see attitude about the coronavirus pandemic and corporate finances, Dremluk suggests that landlords educate themselves about Subchapter 5.

My recommendation would be for landlords to understand the process, become familiar with how it works, how its different from what you might have understood the process to be, he says. A landlord whos asleep at the wheel potentially could end up losing their rights, whatever they may be.

Original post:

How Will Revisions to the US Bankruptcy Code Impact Landlords? - National Real Estate Investor

Legendary German Formula One driver Michael Schumacher took Ferrari to five world championships on ... [+] BBS wheels, to add to his two championships with Benetton. Photo by Martin Rose/Bongarts/Getty Images

Formula One and Indycar supplier BBS GmbH filed for bankruptcy protection in Germany today for the third time in 13 years, on the eve of its 50th anniversary.

Its contract to supply wheels for next years entire Nascar Cup Series field is not believed to be at risk, with BBS purchasing them off its key Formula One supplier, Japans Washibeam.

BBS, which made the poster wheels for every race- and sports-car fan in the 1990s, has taken some of the worlds most famous drivers to victory everywhere from Le Mans and Indianapolis to Formula One.

They were the aftermarket wheel of choice for generations of performance-car owners and made of the poster wheels for every race- and sports-car fan in the 1990s.

Most of the Indycar Series field uses BBS wheels. Photo: Stacy Revere/Getty Images

Famous for their invention of three-piece racing wheels and criss-cross spoke patterns, BBS GmbH announced its bankruptcy on its website today, describing it as a necessary step to prevent an imminent insolvency.

Blaming its troubles on the Coronavirus pandemic, BBS stated it found itself in financial trouble due to the sudden omission of confirmed payments.

The ancestors of the BBS Super RS design graced thousands of sports car posters in the 1980s and ... [+] 1990s. Photo: BBS

This is not new territory for BBS, which declared bankruptcy in 2007 as well, before being rescued by Belgiums Punch International, and then declared bankruptcy again in 2011 before being taken over by South Koreas Nice Corp.

BBS wheels are found on road cars from Ferrari, Porsche, Mercedes-Benz, Audi, BMW, Volkswagen, Toyota, Volvo, Lexus, Jaguar, Infiniti, Rolls-Royce and Subaru.

BBS went in a different design direction for the Lexus ISF wheel. Photo by Spencer Weiner/Los ... [+] Angeles Times via Getty Images

It once dominated high-end performance car wheels, including the Ferrari F40, the Lexus IS-F and an untold numbers of Porsches.

The market slowdown that came with the Covid-19 pandemic forced BBS to shutter both of its production plants, leading to the bankruptcy filing in the court in Rottweil (yes, like the dog).

Being traceable to the currently tough market environment in the automotive branch, BBS situation deteriorated further due to the Corona(sic)-Lockdown which led to a temporary shutdown of the production at both BBS plants, the companys statement read.

However, the key message we want to deliver to you is that the BBS production keeps on running the supply of all our OE and AM customers with BBS wheels is secured!

Prior to the insolvency BBS already initiated an extensive turnaround strategy for the whole company. This new strategy based on BBS AM wheels as focal point will be continued under the guidance of the insolvency administrator.

One of its two administrators, Thomas Oberle, has been here before with BBS, having been appointed as an administrator of BBS International GmbH in 2011, before BBS became BBS GmbH.

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Another Bankruptcy For Germanys BBS Wheels As It Turns 50. - Forbes

Dear Lawyer Mark: I have a question about bankruptcy.

I got stuck with a mortgage payment that went way up last year and couldnt pay my other bills.

Well, the bank took my house and sold it at the courthouse, and we rent now. The thing is, I put a bunch of medical bills and groceries, utilities and what-nots on my credit cards when I was paying my mortgage payment and so I cant pay those no more.

My other problem is that my mom is dying and wants to give me her house, but the credit card companies told me they would take it if I dont pay them and bankruptcy dont matter.

The house aint worth much, but it looks like that and my old beat up car is all Ill have, since the government wants to bail out everyone but me. Can I file bankruptcy and get rid of the credit cards? WORRIED IN SOUTH POINT

Dear Worried: Whether bankruptcy will work for a person is entirely dependent upon that persons unique set of circumstances.

There are several types of bankruptcy, but the most common one for individuals is called Chapter 7. The first thing that you need to know is that Chapter 7 generally gets rid of unsecured debts, like credit cards, and it sounds like the collection agent who spoke to you was not being truthful.

Debt for which you have given collateral, such as a mortgage on a house, or a title for a car loan, are called secured debts. With secured debts, you generally have three options: surrender, reaffirmation, or redemption. Surrender means giving the collateral to the creditor, and the debt is then forgiven.

Reaffirmation means you keep the collateral and agree to keep paying the debt under either the same terms as you were, or under new terms negotiated by your lawyer. Redemption means you pay the creditor a lump sum and keep the collateral.

Of course, you cant keep a mansion and walk away from the debt (unless you got part of that bailout you were talking about), so the law says how much you can keep. These are called exemptions, and vary state to state. In 2008, Ohio greatly increased some of its exemptions. For example, you can now have equity, which is the amount something is worth minus what you owe on it, in the amount of $20,200 per individual in residential real estate. That means that a married couple could have $40,400 of equity in a house, and still save it in a bankruptcy. Previously, the maximum would have been $10,000 for a couple.

Likewise, a person can now have $3,335 of equity in a car, and $10,725 worth of furniture and appliances.

The most important part of the law is the fact that it is tied to the consumer price index. This means that the amount of exemptions will increase automatically every three years.

I highly recommend you speak to a bankruptcy lawyer about your individual case. Most dont charge for an initial consultation, and he or she can better advise you according to your total financial situation.

Its The Law is written by attorney Mark K. McCown in response to legal questions received by him. If you have a question, please forward it to Mark K. McCown, 311 Park Avenue, Ironton, Ohio 45638, or e-mail it to him at LawyerMark@yahoo.com. The right to condense and/or edit all questions is reserved.

The rest is here:

Mark McCown: Bankruptcy works in certain circumstances - The Tribune - Ironton Tribune

In the restaurant industry, bankruptcy has long been seen as a last resort for small business owners, indicative of admitting defeat and likely resulting in liquidating assets and closing up shop for good.

But thanks to a new law passed shortly before the coronavirus pandemic began the Small Business Reorganization Act its easier and less expensive for small businesses with less than $2.7 million in debt to file for Chapter 11 bankruptcy.

We spoke with Joseph Pack, a New York and Florida-based bankruptcy attorney and founder of Pack Law, about destigmatizing bankruptcy for small businesses, and what restaurant owners can and should do if they find they cant pay their rent, vendors, or lenders during the ongoing COVID-19 pandemic crisis.

Get on the phone and renegotiate with your lenders

When trying to get out of the hole of massive debt, the most important skill is clear and honest communication with your landlord, vendors, bank and investors.

Owners should be getting on the phone with their bank and other lenders, Pack said. If they can afford to pay off their debt, they might want to enter a new modification of the loan than they had before thats subject to realistic projections. Get on the phone with your lenders, even the person you bought your stove or espresso machine from, and figure out what their attitude is toward your reduced revenues.

Pack broke it down with a simple example: If youre paying off a high-end commercial espresso machine with $400 in monthly payments and now, because of the COVID-19 pandemic, you are unable to make your monthly payments, then get on the phone with the espresso machine seller and ask for a modification of obligation.

The lender is thinking, I could get $5,000-$6,000 for this $10,000 machine, or this restaurant owner could go into bankruptcy and their assets will be auctioned and then Ill be lucky if I get $250 from that, Pack said. Then the lender will be probably more likely to work with you than ever before.

He warned, however, that business owners should be careful to not just ask for payment forgiveness because thats just temporary.

Its not just about making payments; its also about debt covenants [agreements that a debtor will operate within the paradigms of a loan], Pack said. You have to make certain requirements on a monthly basis. The loan could still be in default even with payment forgiveness. There needs to be a sit-down and discussion about renegotiating obligation.

Do not consolidate your debt

One of the most common solutions struggling business owners consider is to consolidate debt. Even though that might sound like a smart way to mitigate a growing mountain of debt, Pack said, I have never met a business operator who said, Boy, Im glad I consolidated my debts! That was a real lifesaver!

Lets say you have a loan at 1% interest, and you have another loan at 10% interest, and you go to a loan consolidation company and they combine those two loans into one $2 million loan at 5% interest, Pack said. Now, if you somehow come into $1 million and can pay down your debt, instead of paying off the original loan with 10% interest and only having to pay the loan at 1% interest, now youre stuck with paying off half of a loan at 5% interest.

Pack added that leaving your loans unconsolidated also benefits businesses filing for bankruptcy because its always in the debtors favor to have multiple lenders to pick off obligations and debt. With one large debt, you are basically at their whim and dont have room to negotiate.

If you have to file for Chapter 11 bankruptcy, do so under the new Subchapter V of the bankruptcy code

Pack said that he wanted to destigmatize the concept of filing for bankruptcy, which contrary to popular belief does not mean you have to sell your business or close your doors completely. Filing for Chapter 11 has previously been mostly associated with larger companies that can afford federal court proceedings. But a new law, the Small Business Reorganization Act, which was passed in August 2019 and went into effect in February, helps small business approaching bankruptcy options.

The new Subchapter V of the Chapter 11 bankruptcy code allows small businesses with up to $7.5 million in debt to seek reorganization with the goal of keeping control of their business and their equity. Before the pandemic, the maximum debt was $2,725,625, but the eligibility standard was temporarily expanded under the Coronavirus Aid, Relief and Economic Security, or CARES Act, in March.

Small businesses dont have to pay their lenders in full as long as they create a payment plan based on their balance sheet and cash flow within 90 days of filing, give their discretionary income to their creditors, and pay off as much of the loan as they can within three to five years.

The [bankruptcy court] knows no one can run your Italian restaurant other than you and that you need to be there to make the pizza, Pack said. If the business is sold off to some private equity firm who have no idea what theyre doing, no one is going to want to eat the pizza and the restaurant will close anyway. [This plan] lets you keep your equity and your restaurant as long as you do your best to pay what you can over the next few years.

Contact Joanna Fantozzi at [emailprotected]

Follow her on Twitter:@joannafantozzi

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Struggling with debt? Here's what to consider before filing bankruptcy - restaurant-hospitality.com

The COVID-19 pandemic has heavily disrupted our lives, communities, and businesses. Even with new approaches, not all businesses can overcome the substantial challenges brought by the pandemic. Lending programs like the Paycheck Protection Program have brought temporary relief, but many small businesses remain exposed to financial difficulties and face a real risk of bankruptcy.

Small businesses considering bankruptcy protection should be aware of recent changes to the Bankruptcy Code enacted as the pandemic hit the United States and enhanced under the CARES Act. In February 2020, Congress enacted the Small Business Reorganization Act as Subchapter 5 of Chapter 11 of the Bankruptcy Code. It modifies the traditional bankruptcy process set out in Chapter 11 and reduces the cost and expense for small businesses to reorganize. Originally, the debt limit for a small business to qualify under Subchapter 5 was $2.7 million.

The CARES Act, enacted March 27, 2020, increased the debt limit for eligible businesses under the Small Business Reorganization Act from $2.7 million to $7.5 million, to allow more small businesses to take advantage of Subchapter 5. The increase in the debt limit is effective for one year after enactment of the CARES Act until March 27, 2021. Certain companies that previously filed under regular Chapter 11 have successfully been able to convert to cases under Subchapter 5.

Subchapter 5 (with the increased debt limit under the CARES Act) may provide many small businesses with a more attractive option for bankruptcy protection. Among other advantages, the provisions provide for a more streamlined confirmation process (generally without a disclosure statement), no requirement for creditors committees, and the ability to confirm a plan without needing to obtain approval by a class of impaired creditors or complying with the absolute priority rule, so long as the plan provides for the application of all projected disposable income over three to five years to payments under the plan. Thus, the Subchapter 5 process may offer a less costly form of bankruptcy relief, with the ability to retain equity, so long as the debtor dedicates all of their disposable income for three to five years to the payment of creditors. Subchapter 5 also provides for the involvement of a trustee in all cases, including to facilitate the development of a consensual plan of reorganization, but the trustees role is generally more limited than in typical trustee cases.

Many small businesses nearly 5 million nationwide received loans under the popular Paycheck Protection Program (PPP), also part of the CARES Act. If they are considering bankruptcy, PPP borrowers may have questions about the interaction of the PPP program and bankruptcy proceedings.

The issues facing small businesses today are unprecedented and complex. Traditional challenges interact with new programs, creating novel issues. It is important to consult counsel for assistance when navigating these challenges. Vinson & Elkins is monitoring the developments facing businesses during the pandemic and offers clients our cross-disciplinary approach to best resolve issues they face today.

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The Paycheck Protection Program And Bankruptcy | Vinson & Elkins LLP - JD Supra

Less than two weeks after emerging from an18-month bankruptcycaused by its multibillion-dollar wildfire liabilities, Pacific Gas & Electric faces yet another lawsuit for a 2019 fire that California investigators say was caused by its power lines.

On Thursday, the state'sDepartment of Forestry and Fire Protectionconfirmedthat the Oct. 2019 Kincade fire was caused by a failure of a PG&E transmission line in Sonoma County. The fire burned77,758 acres, destroyed 374 structures and forced the evacuation of about 190,000 people, though no one was killed in the blaze.

PG&E had already conceded that a failed jumper cable on a transmission line was the likely cause of the fireand has set aside $600million in anticipation of coveringresulting damages a figure at the lower end of the range of potential losses, the utility statedin its first-quarter earnings report.

On Wednesday, attorneys representing individuals and businesses harmed by the Kincade firefiled a lawsuitaccusing PG&E of failing to maintain the power lines that broke down, despite knowing that its grid network presented significant safety issues. The complaint (PDF) filed in Sonoma County Superior Court cites the utilitys record ofdiverting grid maintenancebudgets to boost corporate profits, as well as its long record of being found at fault for causing some of the states deadliest fires over the past decade.

PG&E decided against shutting off power to the 230-kilovolt transmission line before it failed, although it did de-energize much of itslower-voltage transmission and distribution network in the area in an attempt to prevent the lines from causing fires. That outageleft millions of people without powerand led to widespread complaints from residents and local governments, although it didnt feature the same communications breakdowns and poor preparations that marked the utility'sfirst major public-safety power shutoff(PSPS) event earlier that month.

PG&E has said it will need tocontinue these fire-preventionblackouts for years to come while it continues to inspect and repair its grid in an effort to avoid causing more fires amidhot, dry and windy conditions. Its also planning to spend about $175 million to prepare450 megawatts of dieselgenerators to be available to back up neighborhoods and facilities likely to face outages this summer and fall.

But PG&Es decision not to de-energize the power line that caused the Kincade fire somewhat mirrors itsdecision in Nov. 2018to maintain power flow on the high-voltage transmission line that ended up causing the Camp fire in Northern California's Butte County, which destroyed the town of Paradise and killed 84 people. PG&E filed for Chapter 11 bankruptcy protection in January 2019 in the face of an estimated $18 billion in damages it faced from causing that fire;last month the utility pled guilty to 84 counts of involuntary manslaughter for its role in those killed in the incident.

PG&E has since shut down the transmission line that caused the Camp fire and significantly expanded the scope of its PSPS events, as well as changing how it measures the risk of leaving its grid energized inhigh wind conditions. It has also faced orders from the federal judge overseeing its criminal probation for its role in the 2010 San Bruno natural-gas pipeline explosion todrastically improve its grid inspectionand maintenance regimen.

But this weeks findings that PG&E caused the Kincade fire could force it to consider de-energizing a broader range of high-voltage lines as part of this years PSPSprotocol. That, in turn, could threaten even broader blackouts across Northern California,Michael Wara, the head of Stanford UniversitysClimate and Energy Policy Program and a member of Gov. Gavin Newsoms Wildfires Blue Ribbon Commission, told Greentech Media earlier this year.

The utility won bankruptcy court approval of its plan earlier this month, allowing it to accessa$21 billionstate fund to shield it and Californias other investor-owned utilities from massive fire liabilities.But it's also under strict state supervision to improve its safety culture and meet its wildfire-prevention goals. Failing to do socould exposePG&E to sanction oreven state receivershipunder the terms of its agreement with theCalifornia Public Utilities Commission.

PG&E is in the midst of raising $9 billion in equity and $11 billion in debt as part of its$59 billion restructuring plan, which includes spending about$7.8 billion over the next three years on itswildfire-mitigation efforts. PG&Eshares took a hitafter its $5 billion common stock and equity offering late last month, but analysts say the key to its success or failure for its ongoing restructuring will hinge on whether it can prevent its grid from causing more wildfires this summer and fall.

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Post-Bankruptcy PG&E Faces Lawsuit for Its Role in Causing the 2019 Kincade Wildfire - Greentech Media News

As the summer trickles on, even auction houses have relocated away from cities, and one man is appealing to the new demand for suburban housing with his network of for-rent McMansions. These are strange times, but despite it all, the design industry pushes forward. Read on for headlines, launches and other events, recommended reading and more.

BUSINESS NEWS

According to a recent study from the Pew Research Center, 3 percent of adults in the U.S. have moved permanently or temporarily due to the pandemic, and 6 percent had someone move into their household. As reported by NPR, the number of relocators jumps to 9 percent among people ages 18 to 29. When Pew Center survey participants were asked if they knew someone who had moved, about one in five Americans (20 percent) said yes.

Sur La Table, the Seattle-based cooking and home retailer, has filed for Chapter 11 bankruptcy, reports Forbes. The company, founded in 1972 and owned by Investcorp since 2011, will close more than one-third of its brick-and-mortar stores and is in negotiations with Fortress Investment to sell the remaining locations and its e-commerce operations.

Muji, the Japanese retailer known for its irresistibly neat office, desk supplies and home goods, filed for Chapter 11 bankruptcy in Delaware on July 9, reports CNN. In surprising tandem with this news comes the brands launch of a furniture subscription service. According to Bloomberg, the retailer is offering monthly or annual furniture rentals, catering to the work-from-home culture, with an oak desk and chair set priced as low as $7 a month.

Poltrona Frau Groups Lifestyle Design division, together with majority stakeholder Haworth Inc., has acquired the high-end Italian furniture manufacturer Luxury Living Group. The acquisition will be made through Haworth Italy Holding, the Italian subsidiary of U.S.-based Haworth Inc., and Luxury Living joins a list of brands that include Cappellini, Cassina, Janus et Cie and Poltrona Frau.

Wayfair, which has seen a huge positive rebound in business since the coronavirus pandemic began, was the subject of (now-debunked) criminal conspiracy theories that went viral last week. The allegations of human trafficking through large, expensive pieces of furniture sparked a Twitter firestorm, with #Wayfairtrafficking and #Wayfairgate (in reference to the 2016 Pizzagate conspiracy) trending. An investigation by Newsweek quickly discredited the nefarious accusations, supported by a statement from the company: There is, of course, no truth to these claims. The products in question are industrial-grade cabinets that are accurately priced.

LAUNCHES, COLLABORATIONS & PARTNERSHIPS

The American Society of Interior Designers has launched two new task forces in an effort to raise the role of design in response to the pandemic: The ASID Adaptive Living Task Force will study changes in senior care, adaptive and multigenerational family living; and the ASID IMPACT Review Task Force will identify, study, examine and vet scholarly and professional research concerning COVID-19 as it relates to design and construction.

The research team at ASID has also launched the Interior Design Resiliency Report, a new study that will examine the experiences of interior design professionals during the pandemic and the changes that can be expected in the design of the built environment. The report will begin with a series of surveys that look at where designers currently standthe first one will close July 24.

Design*Sponge founder Grace Bonney announced last week that the blogs Instagram account would permanently become dedicated to the voices, projects and experiences of designers of color. While Bonney will stay on, she says, Im divesting myself from the center of this platform (Ill still be here, I am still invested in this work, and youll still hear from me) because I want to *invest* in designers of color.

The inaugural Kips Bay Decorator Show House Dallas has announced the 27 designers, architects and contemporary artists that will transform the featured home in Old Preston Hollows Historic Woodland Estates neighborhood. Beginning September 25, visitors will be welcome to tour the work of Chad Dorsey, Mark D. Sikes, Michelle Nussbaumer and Thomas James. For the full list of designers, click here.

Katie Leede wearing a caftan in Koto, one of her fabric designs that she donated to the cause.Courtesy of Christina Juarez

Christina Juarez, founder of her eponymous New Yorkbased communications firm specializing in design, made a splash with her Caftan Challenge fundraiser in the early days of COVID-19, raising over $20,000 for Kips Bay Boys and Girls Club by asking her Instagram network to post photos wearing caftans. Now, in a renewed fundraising effort, Juarez has reached out to several textile designers for donations, all of which are being transformed into one-of-a-kind caftans to be sold at various pop-up shops and trunk shows. The first round of caftans will be sold August 2 at Katie Leede and Co. in Sag Harbor, New York. All of the proceeds will go to the Kips Bay Boys and Girls Club.

Together with San Franciscobased architecture and design firm Gensler, Minnesota countertop manufacturer Cambria has launched 14 new quartz designs. The designs, which involved two years of research and development, are built around the brands proprietary Natural Colour System, built upon a global definition of hue and quality that will enable designers and manufacturers to communicate cross-industry color choices.

Only July 9, New York consumer brand conglomerate WHP Global announced a long-term licensing agreement with home textile importer Sunham Home Fashions to develop and distribute a home goods line for the Anne Klein fashion brand. Slated to launch in spring 2021, the Anne Klein Home Collection will consist of soft goods to be carried in select retail stores and online.

CALENDAR UPDATES

NY Now has canceled its fall event, formerly scheduled from October 18 to 20 at the Jacob Javits Center in New York. Recent developments have made it impossible to bring buyers and brands together safely and successfully, the organizers said in a statement. The winter 2021 show is still on the books, in addition to a host of digital offerings.

Orgatec, the leading trade fair for office furniture concepts, has canceled its 2020 editionthe fair will return as part of IMM Cologne from January 18 to 24, 2021, and the following iteration will take place October 25 to 29, 2022.

RECOMMENDED READING/LISTENING

Universal Furniture marketing director Neil MacKenzie interviews Business of Home editor in chief Kaitlin Petersen on the most recent episode of the brands bimonthly podcast, Explore Home. She shares where her passion for design originated, how she finds magic in business connections and the role that BOH plays in the industry. To listen to the whole episode, click here.

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The Pequod fixture from Hallworth, now available through R HughesCourtesy of R Hughes

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Homepage image: The Cassiopeia fixture from Hallworth, now available through R Hughes | Courtesy of R Hughes

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Wayfair conspiracy theories, Sur La Table and Muji file for bankruptcy and more - Business of Home

Even as the coronavirus pandemic battered the economy, forcing tens of millions of workers to file for unemployment and shuttering businesses large and small, a surprising trend emerged: The number of people filing for personal bankruptcy plunged.

In April, consumer bankruptcies dropped 47% from the same month last year, while May filings were down 43% year over year, according to the American Bankruptcy Institute. For the first half of the year, bankruptcies were 24% lower than the first six months of last year.

Experts pointed to numerous factors for the slowdown.

Courts and attorneys offices remained closed during state shutdowns. Evictions and foreclosures often precursors to bankruptcy because people want to save their homes were put on hold. Generous government support and forgiving creditors also kept many from falling into financial distress. Last, those on the brink of bankruptcy before the pandemic had more pressing issues to deal with.

Peoples mental inboxes are full, Professor Robert Lawless at the University of Illinois College of Law, who specializes in bankruptcy, consumer finance and business law, told Yahoo Money. There are a lot of things to sort out in their lives going to see a bankruptcy lawyer has been pushed further down on the to-do list for understandable reasons. I think that was a big part in the early days and weeks of the pandemic.

But the reprieve may be short-lived as the economy sputters, stopping and going as new COVID-19 outbreaks pop up, and as many of the temporary layoffs morph into permanent ones.

As government lifelines to help stabilize the economy begin to expire, bankruptcy provides a shield for households and companies facing intensifying financial distress, ABI Executive Director Amy Quackenboss said in a statement earlier this week, announcing the half-year bankruptcy statistics. We anticipate filings to begin increasing as a result.

How quickly people file for bankruptcy and how many will do so remain unclear, but bankruptcy attorney George Wade in Alexandria, Virginia, isnt very optimistic.

A man walks through a neighborhood on July 07, 2020 in the Brooklyn borough of New York City. (Photo by Spencer Platt/Getty Images)

Everyone who files for unemployment is a potential bankruptcy, he said, noting that many of those who lost jobs wont be getting them back. Were in a state of suspended animation because the government is picking things up.

What happens, he asked, when many of the outside forces keeping people afloat are removed, starting with the expiration of the extra $600 in unemployment benefits at the end of the month and then the eventual resumption of evictions and foreclosures?

In the fall, there will be a flood of bankruptcies, he said. I think it will be a bloodbath.

Lawless is more skeptical. His past research on bankruptcies shows that people take a long time to choose bankruptcy, typically struggling through financial difficulties between two to five years before filing. Oftentimes, they are finally persuaded after a creditor sues them.

Its not like if people get laid off from a job today that they file for bankruptcy tomorrow, he said. It has a very long tail.

Lawless also noted that bankruptcy doesnt find unemployed people jobs; it solves debt problems. If they dont have debt, they dont file for bankruptcy, he said.

Eric Lipps, 52, waits in line to enter the NYCHires Job Fair in New York December 9, 2009. REUTERS/Shannon Stapleton

Story continues

Debt rather than job loss has a tighter macroeconomic correlation with bankruptcy, going back to the explosion of filings in the late 1990s during the dot.com boom and then the increase during the Great Recession. Both of those periods were punctuated by high consumer debt.

Before the pandemic, consumer credit also had been rising, approaching but not yet reaching levels seen before 2008. But that doesnt mean Lawless doesnt expect an increase in filings as the pandemic and its rolling economic effects continue. He just expects many Americans to turn to other debt to sustain them until they finally reach a breaking point.

I think there will be more bankruptcies, but the shape of that curve may be more of a gradual run-up as debt problems accumulate, he said. We may look out two years from now and see there were a lot more people filing.

Janna is an editor for Yahoo Money andCashay. Follow her on Twitter@JannaHerron.

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Read more personal finance information, news, and tips on Cashay

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Personal bankruptcies plunge during pandemic, but 'a flood' could be on the horizon - Yahoo Finance

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 Ramsey+ trial.

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 Ramsey+, a real money plan for real people. Start a free trial today.

More here:

The Truth About Bankruptcy | DaveRamsey.com

A recent report by Carbon Tracker estimated that the cost to plug a typical shale well is close to $300,000 far higher than the estimates used by companies, regulators and financial analysts because the wells are far deeper than conventional ones.

Based on the new estimates, MDC, the company that paid its C.E.O. the $8.5 million in consulting fees, could require more than $40 million to clean up its 140 wells if they are permanently closed, according to an analysis by Greg Rogers, a co-author of the report and a former adviser to BP and its auditors, Ernst & Young.

Extraction Oil & Gass cleanup costs for its 1,000 wells could exceed $200 million, in excess of its reported liabilities, Mr. Rogers estimates. It may be the case that many of the U.S. frackers now heading for bankruptcy were insolvent before Covid-19 if environmental liabilities were properly accounted for, he said.

The bankruptcies have painful consequences for some employees as well.

This past January, a crew of engineers was upgrading a well head at a Chesapeake Energy site in east central Texas when leaking natural gas ignited. Three workers died; a fourth worker sustained catastrophic and permanent injuries, according to a lawsuit he later filed.

Chesapeake Energy, which declared bankruptcy last month after paying out executive bonuses, might also be environmentally insolvent, Mr. Rogers estimates, with potential cleanup costs of $1.4 billion, nearly as much as its year-end market value of $1.6 billion. Chesapeakes filings show that it has set aside only $41 million in bonds to cover the cleanup of its 6,800 wells.

Now, however, all lawsuits against the company have been put on hold by the bankruptcy process. The families lawyers are pushing to resume their cases and argue that settlements should be resolved separate to creditors claims against the company. Chesapeake declined to comment.

You have large corporations protecting and enriching their top executives, while theyre cutting corners and putting their companies in a death spiral, said Ryan Zehl of Zehl Associates, who is representing Justin Cobb, who was severely injured, and the family of Wendell Beddingfield, who died in the explosion.

Ordinary Americans, the people who need the money the most, are being left behind and neglected, he said.

Excerpt from:

Fracking Firms Fail, Rewarding Executives and Raising Climate Fears - The New York Times

Many of us have a basic understanding of U.S. bankruptcy filings under chapters 7, 11, and 13, but we may not know very much about chapter 15. Jackson Walker Bankruptcy, Restructuring, & Recovery attorneys Kristhy Peguero and Jennifer Wertz discuss chapter 15's cross-border insolvency and its invocation of the jurisdiction of the U.S. bankruptcy court to assist in the administration of foreign insolvency and restructuring proceedings. With chapter 15 filings, you'll see novel orders between domestic and foreign courts in an attempt Seemore+

The issues of jurisdiction and venue are important within the context of chapter 15 filings. Where the debtor has a main interest, or comity, this is traditionally where the proceedings are held. However, it could also be where the debtor's headquarters is located. There are some interesting twists with how the debtor may be able to shift the comity in anticipation of a filing. Separate from jurisdiction, the debtor may also seek a venue recognition within the United States, depending upon their operations here. To make it even more interesting, the debtor may have their choice between several different venues within the United States. Texas bankruptcy courts, especially the Southern District of Texas, have become more popular recently with its connection to international commerce, technology advancements, sophistication, and consistency of judges.

For additional JW Fast Take podcasts and webinars, visit JW.com/Fast. Seeless-

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Chapter 15 Bankruptcy Issues, Venue, and Jurisdiction by Kristhy Peguero and Jennifer Wertz - JD Supra

Even as the coronavirus pandemic battered the economy, forcing tens of millions of workers to file for unemployment and shuttering businesses large and small, a surprising trend emerged: The number of people filing for personal bankruptcy plunged.

In April, consumer bankruptcies dropped 47% from the same month last year, while May filings were down 43% year over year, according to the American Bankruptcy Institute. For the first half of the year, bankruptcies were 24% lower than the first six months of last year.

Experts pointed to numerous factors for the slowdown.

Courts and attorneys offices remained closed during state shutdowns. Evictions and foreclosures often precursors to bankruptcy because people want to save their homes were put on hold. Generous government support and forgiving creditors also kept many from falling into financial distress. Last, those on the brink of bankruptcy before the pandemic had more pressing issues to deal with.

Peoples mental inboxes are full, Professor Robert Lawless at the University of Illinois College of Law, who specializes in bankruptcy, consumer finance and business law, told Yahoo Money. There are a lot of things to sort out in their lives going to see a bankruptcy lawyer has been pushed further down on the to-do list for understandable reasons. I think that was a big part in the early days and weeks of the pandemic.

But the reprieve may be short-lived as the economy sputters, stopping and going as new COVID-19 outbreaks pop up, and as many of the temporary layoffs morph into permanent ones.

As government lifelines to help stabilize the economy begin to expire, bankruptcy provides a shield for households and companies facing intensifying financial distress, ABI Executive Director Amy Quackenboss said in a statement earlier this week, announcing the half-year bankruptcy statistics. We anticipate filings to begin increasing as a result.

How quickly people file for bankruptcy and how many will do so remain unclear, but bankruptcy attorney George Wade in Alexandria, Virginia, isnt very optimistic.

A man walks through a neighborhood on July 07, 2020 in the Brooklyn borough of New York City. (Photo by Spencer Platt/Getty Images)

Everyone who files for unemployment is a potential bankruptcy, he said, noting that many of those who lost jobs wont be getting them back. Were in a state of suspended animation because the government is picking things up.

What happens, he asked, when many of the outside forces keeping people afloat are removed, starting with the expiration of the extra $600 in unemployment benefits at the end of the month and then the eventual resumption of evictions and foreclosures?

In the fall, there will be a flood of bankruptcies, he said. I think it will be a bloodbath.

Lawless is more skeptical. His past research on bankruptcies shows that people take a long time to choose bankruptcy, typically struggling through financial difficulties between two to five years before filing. Oftentimes, they are finally persuaded after a creditor sues them.

Its not like if people get laid off from a job today that they file for bankruptcy tomorrow, he said. It has a very long tail.

Lawless also noted that bankruptcy doesnt find unemployed people jobs; it solves debt problems. If they dont have debt, they dont file for bankruptcy, he said.

Eric Lipps, 52, waits in line to enter the NYCHires Job Fair in New York December 9, 2009. REUTERS/Shannon Stapleton

Story continues

Debt rather than job loss has a tighter macroeconomic correlation with bankruptcy, going back to the explosion of filings in the late 1990s during the dot.com boom and then the increase during the Great Recession. Both of those periods were punctuated by high consumer debt.

Before the pandemic, consumer credit also had been rising, approaching but not yet reaching levels seen before 2008. But that doesnt mean Lawless doesnt expect an increase in filings as the pandemic and its rolling economic effects continue. He just expects many Americans to turn to other debt to sustain them until they finally reach a breaking point.

I think there will be more bankruptcies, but the shape of that curve may be more of a gradual run-up as debt problems accumulate, he said. We may look out two years from now and see there were a lot more people filing.

Janna is an editor for Yahoo Money andCashay. Follow her on Twitter@JannaHerron.

Read more:

Read more personal finance information, news, and tips on Cashay

Continued here:

Personal bankruptcies plunge during pandemic, but 'a flood' could be on the horizon - Yahoo Money