Category Archives: Bankruptcy

The coronavirus pandemic appeared to be the final straw for a number of retailers that filed for bankruptcy in 2020, a year in which major apparel companies including J.C. Penney Co. Inc., Neiman Marcus Group, J. Crew Group Inc., Brooks Brothers, Tailored Brands Inc. and more filed for Chapter 11.

But the economic downturn sparked by the pandemic is expected to have the slow-burn effect it often does, with more companies headed for financial trouble as the pandemic persists into 2021 and the point of widespread vaccinations still lies months away, experts said.

I think there are a lot of retailers out there who were just on the edge, and trying to make it through, hoping that the holiday season would be successful for them, and successful enough to see a greater future that would allow them to avoid bankruptcy, said Schuyler Carroll, a partner at Loeb & Loeb LLP.

What Im hearing is that there are some of those, and there are some of those that are not going to be able to make it and will be looking to a bankruptcy to try and preserve some future, he added.

I think most of the retailers that have made it this far, theyre hoping to avoid a liquidation, he said. If their holiday season was not good enough, theyll have to resort to liquidation or resort to bankruptcy to bring in new investors, or a sale, or slim down their operations in some way.

Bankruptcy attorneys are also anticipating a ripple effect from retailers financial troubles, expecting that the impact on landlords and suppliers will start to become more apparent in 2021.

More recently, real estate investment trusts including mall operator CBL & Associates Properties Inc. and the Pennsylvanian REIT have filed for bankruptcy protection.

From the landlord perspective, the economics have shifted, said Brad Sandler, who co-chairs the creditors committee practice group at Pachulski Stang Ziehl & Jones. REITs that are less stablethey tend to be [those] that have the B- and C-quality malls and I think that we very well may see some of them restructure, either in or out of court in 2021.

The U.S. courts system issued findings in July that said business bankruptcy filings at that point were about the same as a year ago, at nearly 22,500 filings.

Bankruptcy filings tend to escalate gradually after an economic downturn starts, according to the report. Following the Great Recession, new filings escalated over a two-year period until they peaked in 2010.

But the pandemic has accelerated trends that were already eroding traditional retail. In August, mall traffic at large real estate companies including Simon Property Group Inc., Brookfield Property, Taubman Centers Inc. and others had declined roughly 15 percent from last year, according to a report by S&P Global Market Intelligence analysis based on information from data collection company AirSage.

E-commerce has continued to soar, with online sales over the 2020 holiday season increasing 49 percent from last year, according to data from Mastercards data arm Mastercard SpendingPulse.

An issue tied to all of that is going to be dealing with the supply chain, and drawing customers in and making sure your supply chain doesnt get tied up with disruptions, said Sandler of Pachulski Stang Ziehl & Jones. Its going to be really important for retailers in 2021 to focus on their supply chain management.

Bankruptcy courts, meanwhile, have stayed busy and functional throughout the pandemic, with judges adapting their processes, hosting virtual hearings, conferences and mediations to shepherd cases along, and granting rent deferrals during the bankruptcy where retailers seek it.

Having remote proceedings has allowed stakeholders who previously might not have been able to travel to physical proceedings to now simply appear electronically and be heard in court, said Melanie Cyganowski of Otterbourg PC, a former bankruptcy judge in New York.

I think the bottom line is that the bankruptcy courts are very sensitive, and are able to respond to the nuances of the time period that theyre facing, said Cyganowski. And so, if the bankruptcy laws permit a flexible approach, more likely than not, they will take it.

Another development that has made the bankruptcy court more accessible is the relatively new Subchapter V process, which was created by the Small Business Reorganization Act of 2019 to make the process more affordable for small businesses with smaller debt loads. Furla USA, for instance, is currently in the process of reorganizing through Subchapter V of the Chapter 11 process.

The amount of fees that will be spent in these Chapter 11s is enormous, if youre somebody who has one store, or two stores, you typically really couldnt do it, because it was so expensive, said Paul Aloe, partner at Kudman Trachten Aloe Posner LLP.

I think Subchapter V is going to be very important, he said. You really have an expedited, streamlined procedure.

Ultimately, the fashion industrys recovery and fate will hinge on keeping up with the role of clothing in a pandemic world. The restricted opportunities for dressing up, from corporate offices continuing to allow employees to work remotely to the dwindling number of social events, will have implications for how people think about their wardrobes, said Cyganowski, the former bankruptcy judge.

What are we using clothes for, if people are not going out, if theyre not going out to dinner, if theyre not going on dates, if theyre not going to the theater, if theyre not going to work? she reflected.

Its like, 75 percent of a wardrobe is not being used if people dont get excited about, Oh, Ive got to get a holiday dress, Ive got to get a winter coat, she said.

The pandemic is affecting so much of a part of our lives, that I just think that retail is going to have a very difficult time coming back, Cyganowski said.

See the original post:

The State of Retail Bankruptcies in 2021 - WWD

ByMaura Webber Sadovi

Chapter 12 family farm bankruptcies fell in 2020 for the first time in six years, in part because federal aid helped offset pandemic supply chain problems that resulted in the forced dumping of milk this spring. But declining farm cash receipts and high debt levels have many worried that Chapter 12 filings will resume their upward tack once government aid programs are rolled back, according to two economists.

Tractor spraying pesticides on soybean field with sprayer at spring

The total number of family farm bankruptcy filings dipped last year to 523, below the nine-year high of 567 in 2019 but still the second-highest annual amount since 2010, federal court filings show. The decline comes even as larger farms became eligible to file for specialized relief after the debt cap was raised in August 2019, the economists said.

A decline in Chapter 12 filings would mark an end to the multi-year rise in farm bankruptcies due to a range of woes, including the trade war with China. But its not yet clear whether the downshift marks a sustainable change in momentum or a temporary pause.

Court closures in the wake of the Covid-19 pandemic have made it more difficult for farmers to file for bankruptcy relief, and a wave of pandemic-related federal aid ranging from specific farm aid to the Paycheck Protection Program has propped up farm finances, according to the economists and a farmer.

I dont think were getting a clear view of bankruptcies this year, said John Newton, chief economist at the American Farm Bureau Federation, one of the countrys largest farm lobbying groups, in an interview withDebtwire ABS in late December. Its going to take some time to really evaluate all the economic impacts.

Commodity prices, land values may not be enough

Early in the year farmers were reeling as shuttered schools and restaurants disrupted their supply chains and slaughterhouse closures due to Covid-19 made it difficult to find places to process cattle, hogs and poultry, he said. By year's end farmers were helped by higher commodity prices, but that wont be enough to keep some out of bankruptcy, according to Joseph Peiffer, an Iowa attorney.

An anticipated 43% rise in net farm income in 2020 to $120 billion was driven in part by $46.5 billion in payments from thefarm billand conservation programs as well as such ad hoc stopgap federal programs as the Coronavirus Food Assistance Program, Newton wrote in a December 3 report. Through the latter, the USDA bought billions of dollars in produce, milk and meat which was then distributed through food banks, churches and non-profits.

Meanwhile, projected farm cash receipts from product sales dipped to $367 billion in 2020 from $370 billion in 2019, according to Newton. This year, if the ad hoc farmer aid is stripped away, net farm income will likely drop to the $90-$100 billion range, proving that farm income in 2020 was a false positive, Newton wrote.

It is also possible that bankruptcies may be stabilizing, but debt levels held by farms are still elevated, said the second economist. That will keep pressure on farmers, and could result in more filings if the emergency aid drops off in 2021, said the second economist.

Another factor is land values, which have allowed many strapped farmers to tap their equity for more debt or sell and get out of farming altogether rather than filing for bankruptcy. Unlike the 1980s farm crisis, the average value of farm real estate per acre has risen annually since 2016, but mostly plateaued in 2020 at $3,160, according to an August USDA report. Values in Kansas, Nebraska and the Dakotas were an exception, falling 2.3% on average, according to the report.

The most powerful kind of bankruptcy

Strong land values are a lifeline for both the distressed farmers who use Chapter 12 to reorganize and stay in businesses and those who end up liquidating in Chapter 12 which lets them avoid paying taxes on their farm sales, the sources said.

For instance, a farmer who sold his Iowa farm out of a Chapter 12 bankruptcy in early December for $3.47 million faces $600,000 in federal taxes on the sale at closing, according to Peiffer. But the farmer will be able to discharge that tax through his bankruptcy case, something that would not have been possible if he had filed a Chapter 7 bankruptcy.Chapter 12 is the most powerful chapter of the bankruptcy code, said Peiffer.

The stew of federal aid and rapidly shifting business patterns leaves many farmers unsure where they stand. Carol Clement, who lost her father to the virus last spring, still isnt clear about the full impact that the pandemic has had on her businesses in 2020 due to myriad changes in expenses, costs and consumer demand.

Clement and her husband, John Harrison, own and operate Heather Ridge Farm in Preston Hollow, New York, where they raise grass-fed beef cows, sheep, goats, pigs, chickens and turkeys. Clement saw a big uptick in sales early in the pandemic as more down-staters moved to the Catskill Mountain area to work remotely in the spring and summer. But now many of those temporary customers have disappeared.

The viruss November surge meant that Clement had fewer customers for her 20-pound turkeys due to downsized family gatherings. She pivoted, quickly deciding to process some of the birds as ground turkey meat and others into turkey legs and breasts. But Clement didnt add the costs of additional required trips to slaughterhouses to her already rich $6.90 per pound turkey prices. And until she finishes calculating her taxes for the year, Clement wont know how all the changes have affected her finances.

With the virus still raging, Clement and other small farmers are all leery of what the next years going to bring," she said.

Maura Webber Sadovi is a Debtwire ABS editor and reporter. She can be reached atMaura.Sadovi@acuris.com.

Visit link:

Farm Bankruptcies Drop Thanks To Federal Aid, But Falling Cash Receipts And Elevated Debt Portend Trouble Ahead - Forbes

The Consolidated Appropriations Act (CAA), one of the largest bills ever passed by Congress, was signed into law on December 27, 2020. In addition to providing 2021 federal government funding and further COVID-related relief, the CAA contains several amendments to title 11 of the Bankruptcy Code to provide temporary relief and flexibility to debtors, landlords, tenants, and vendors who have been materially impacted by the ongoing COVID-19 pandemic.

The key takeaways for amendments to the Bankruptcy Code are as follows:

The CAA amends section 365(d) of the Bankruptcy Code for subchapter V small business debtors to allow an additional 60 days to pay rent (this is in addition to the existing 60-day delay permitted under subchapter V), where a small business debtor has experienced and is continuing to experience a material COVID-related financial hardship. Such deferred obligations can now be paid out over time pursuant to the plan (as opposed to the day the company emerges from bankruptcy). (2-year sunset, December 27, 2022).

For all bankruptcy cases, under the CAA, debtors now have 210 days to assume or reject a lease (and, as before, may request an additional 90-day extension). This gives tenant-debtors 300 days (up from 210 days) to try to come up with a viable exit strategy from bankruptcy. (2-year sunset, December 27, 2022).

The CAA helps landlords and trade vendors who provided assistance to their tenants and customers by prohibiting a debtor from avoiding payments that resulted from an agreement to defer payments. To qualify, (a) the debtor and landlord/supplier must have entered into a lease or executory contract before the filing of the bankruptcy case, (b) they must have amended the lease or contract after March 13, 2020, and (c) the amendment must have deferred or postponed payments otherwise due under the lease or contract. This amendment should encourage landlords and suppliers to work with distressed counterparties, with the understanding that negotiated deferred or abated payments will not be subject to clawback as a preference. (2-year sunset, December 27, 2022)

The CAA contains provisions to allow subchapter V debtors to obtain PPP loans, but such provisions will only go into effect in the sole discretion of the SBA administrator. Currently, courts are split as to whether a debtor is eligible for a PPP loan.

The CAA also includes temporary changes that primarily impact consumer bankruptcy cases, including:

Prior SBRA Debt Limit Amendments Not Extended

Certain provisions of the Bankruptcy Code that were recently amended in connection with the earlier stimulus round (which we have previously written about) are subject to expire. Most importantly, the CARES Act increased the debt ceiling for subchapter V small business debtors from $2,725,625.00, to $7,500,000.00. This modification greatly expanded the universe of potential small business debtors that could utilize the many advantages of subchapter V of the Bankruptcy Code.

However, this provision is set to expire on March 27, 2021. Unless Congress acts quickly, a significant number of small businesses will no longer be eligible to file under subchapter V of the Bankruptcy Code. Businesses continuing to experience financial distress may want to consider their options in advance of the March 2021 expiration to ensure that they can still take advantage of subchapter V.

Read the original here:

Key Takeaways from CAA Amendments to Bankruptcy Code; No Extension of Cares Act Provision Increasing Eligibility for Subchapter V - Lexology

The new Consolidated Appropriations Act, 2021 (the Act), which was signed into law on December 27, 2020 (H.R. 133), includes within its 5,593 pages a number of new bankruptcy relief provisions for businesses as part of what the legislation calls the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act. Additional bankruptcy relief provisions are found in a miscellaneous section of the Act. A summary of the relief provisions that will affect businesses, predominately small businesses, follows.

Under regulations adopted by the SBA in response to the CARES Act, businesses in bankruptcy were disqualified from receiving PPP loans. The SBA regulations spawned an avalanche of litigation which challenged them on grounds that they were unlawfully discriminatory under 11 U.S.C. 525(a), see e.g. In re Springfield Hospital, Inc., 618 B.R. 70, 80-93 (Bankr. D. Vt. June 22, 2020), appeal pending Nos. 20-3902, 20-3903 (2d Cir.), or were arbitrary and capricious or exceeded the SBAs rulemaking authority. See e.g. In re Gateway Radiology Consultants, P.C., 2020 WL 7579338 (11th Cir. Dec. 22, 2020) (reversing bankruptcy courts ruling striking down the regulations as exceeding SBA authority and as arbitrary and capricious).

In somewhat of quizzical intermediate approach, the new law provides that only debtors that are proceeding under Subchapter V of Chapter 11, which is the Small Business Reorganization Act of 2019 (SBRA), as well as Chapter 12 and Chapter 13 debtors, may apply to the bankruptcy court for a PPP loan. The provisions of SBRA are summarized here,with the caveat that the debt limitations to qualify for SBRA were expanded by the CARES Act to $7.5 million. This new provision is yet another advantage to seeking relief under Subchapter V, but does nothing to resolve the pending litigation over the SBAs prohibition against extending PPP loans to Chapter 11 debtors that are not proceeding under Subchapter V.

Under the new provision, which amends 364 of the Bankruptcy Code, a qualifying debtor may apply for and obtain authority to receive a PPP loan which, if not forgiven, will be treated as a superpriority administrative expense in the Chapter 11 proceeding, which means it will come ahead of all administrative expenses in the case. If such an application is made, the bankruptcy court is required to hear it within seven days of the filing and service of the application. In addition, the debtors plan of reorganization may provide that the PPP loan, if not forgiven, may be paid back under the terms on which it was originally made, which are favorable.

Section 365(d)(3) of the Bankruptcy Code requires that Chapter 11 debtors continue to pay rent and comply with all other obligations under a lease of commercial real estate from and after the bankruptcy filing date, but vests authority in the bankruptcy court to extend the time of performance under such a lease for up to 60 days. In yet another plum given to Subchapter V debtors, that section has been amended to allow the bankruptcy court to extend the time for performance under these type of leases for a Subchapter V debtor for an additional 60 days, but only if the debtor is experiencing or has experienced a material financial hardship due, directly or indirectly, to the COVID-19 pandemic.

The period of time within which a Chapter 11 debtor has to either assume or reject a lease of commercial real estate has also been changed. With the enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), a Chapter 11 debtor became limited to a period of 120 days, or 210 days with the court's permission, to decide whether to assume or reject nonresidential real property leases. Prior to BAPCPA, the initial period of time to make that decision was 60 days, but it could be extended by the bankruptcy court for cause without any outside time limitation.

Under the Act, the period of time to decide whether to assume or reject a lease of commercial real estate has been expanded to 210 days, subject to an additional 90 days with the bankruptcy courts permission.

There is a sunset provision for the foregoing amendments that is two years after the date of enactment of the Act.

The Act appears to recognize that many landlords and suppliers have entered into forbearance or deferral agreements with businesses in financial trouble due to the pandemic, and laudably provides preference protection for payments that are made pursuant to these types of agreements. Generally, a payment to a creditor that is made within 90 days of a bankruptcy filing on account of a pre-existing debt can be recovered, or clawed back to the bankruptcy estate, as a preferential transfer (subject to certain defenses).

For landlords of a commercial tenant, any covered payment of rental arrearages will be protected from avoidance as a preference if: (i) the payment is made pursuant to an agreement or arrangement to defer or postpone the payment of rent or other charges under the lease, (ii) the agreement or arrangement was made or entered into on or before March 13, 2020, and (iii) the amount deferred or postponed does not, (A) exceed the rent and other charges that were owed under the lease prior to March 13, 2020, and (B) include fees, penalties, or interest in an amount that is greater than what would be owed under the lease, or include any fees, penalties, or interest that would be greater than what would be charged if the debtor had paid all amounts due under the lease timely and in full before March 13, 2020.

For suppliers of goods and services, the protection given is similar to that provided for landlords. Specifically, any covered payment of supplier arrearages will be protected from avoidance as a preference if: (i) the payment is made pursuant to an agreement or arrangement to defer or postpone the payment of amounts due under a contract for goods or services, (ii) the agreement or arrangement is made on or before March 13, 2020, (iii) the amount deferred or postponed does not, (A) exceed the amount that was due under the contract prior to March 13, 2020, and (B) include fees, penalties, or interest in an amount that is greater than what would be owed under the contract, or include any fees, penalties, or interest that would be greater than what would be charged if the debtor had paid all amounts due under the contract timely and in full before March 13, 2020.

There is a sunset provision for the foregoing amendments that is two years after the date of enactment of the Act.

The ability of a Subchapter V debtor to obtain a PPP loan while in bankruptcy is certainly a welcome addition to the bankruptcy landscape, but left in lurch are larger companies that do not seem less deserving of the same relief. Subchapter V debtors that are materially affected by the pandemic will also benefit from an additional form of rent relief based on the new authority given to bankruptcy courts to extend the debtors time for paying rent and other charges under a lease of commercial real estate for an additional 60 days, on top of the 60-day deferral period that already existed in the law. And all Chapter 11 debtors will now be given at least 210 days to decide whether to assume or reject such leases, subject to an additional 90 days with the courts permission.

The new provisions protecting landlords and suppliers from having to disgorge payments that might otherwise be considered preferences if they are made pursuant to a deferral or forbearance agreement reflect a sensible recognition that such arrangements were designed to provide financial assistance to a struggling business and are deserving of protection.

[View source.]

See the article here:

New Bankruptcy Relief Provisions Brought to You by the 2021 Federal Appropriations Act - JD Supra

ByMarty Schladen-

A federal judge handling the bankruptcy of a company involved in an allegedly corrupt nuclear bailout has ordered a prominent law firm to explain its role in the affair.

The firm, Akin Gump Strauss Hauer & Feld, LLP, served both as lead bankruptcy counsel to the company receiving the $1.3 billion ratepayer bailout and as a lobbyist for the effort to pass it last year, U.S. Bankruptcy Judge Alan M. Koschik wrote last week.

The effort to pass the bailout, House Bill 6, has since blown up into what U.S. Attorney David M. DeVillers said is likely the biggest bribery scandal in Ohio history.

He alleged that $61 million from Akron-based FirstEnergy Corp. and associated companies was funneled through dark-money groups and used to make Rep. Larry Householder, R-Glenford, speaker. Householder then led the effort to pass and defend the bailout, most of which will go to two failing nuclear plants in Northern Ohio.

Householder and four associates were charged in July. In late October, FirstEnergy fired CEO Chuck Jones after two Householder associates pleaded guilty.

Last week, the state's top utility regulator, Public Utility Commission of Ohio Chairman Sam Randazzo, resigned after the FBI was spotted removing documents from his German Village home days earlier. Around the same time, FirstEnergy revealed that in 2019, it paid more than $4 million to someone who "subsequently was appointed to a full-time role as an Ohio government official directly involved in regulating" FirstEnergy.

Judge Koschik ordered Akin Gump a firm with offices around the world to explain its role in the scandal as part of a routine proceeding to pay the lawyers in the bankruptcy as it wound down.

FirstEnergy Corp. made the decision to spin off nuclear plants in Ohio and Pennsylvania in late 2016. They became part of FirstEnergy Solutions, which filed for bankruptcy in March 2018.

FirstEnergy Corp. claimed earlier this year that it gave up operational control when FirstEnergy Solutions got its own board of directors. But FirstEnergy Corp. CEO Jones also acted as CEO of a third company that provided most, if not all, management for the nuclear spinoff, FirstEnergy Solutions.

It appeared that part of the purpose of the spinoff and the bankruptcy might be to insulate FirstEnergy Corp. from from liability for part of the eventual $10 billion cost to clean up the nuclear sites.

Earlier this year, FirstEnergy Solutions emerged from bankruptcy with a new name, Energy Harbor.

In his Nov. 20 order, Koschik noted items in bills submitted by Akin Gump that struck him.

"Approximately $2.8 million of the compensation sought by that firm related to state government lobbying, including work related to the ultimate passage of Ohio House Bill 6," the judge wrote. "The court understands that the circumstances surrounding the passage of HB 6 is relevant to the criminal complaint against the criminal defendants and possibly other ongoing investigations."

Koschik pointedly noted that federal government lawyers have shown no interest in Akin Gump's disclosure that it wanted almost $3 million for its role witting or unwitting in what federal prosecutors are now calling a criminal conspiracy.

"Notwithstanding the lack of opposition from the United States, the court remains concerned about the value provided to (EnergyHarbor) in connection with their state-level lobbying work in Ohio, given the apparently expanding federal investigations, civil and criminal, regarding the passage of HB 6," Koschik wrote.

Akin Gump's New York office didn't immediately respond to a request for comment.

Koschik said that the bill submitted by Akin Gump included time records for members of its "Statehouse team:" Sean G. D'Arcy, Henry A. Terhune, James R. Tucker, and Geoffrey K. Verhoff.

The four "have never appeared in this court during these (bankruptcy) cases. Based upon the court's review of the docket, they have never made written declarations in these cases," the judge wrote.

"However, according to Akin Gump's invoices submitted in support of that firm's applications for compensation, these were the timekeepers involved who interacted with currently-indicted individuals or entities in the service of" Energy Harbor, Koschik wrote. "The nexus apparent in the docket between this Ohio Statehouse team and currently-indicted individuals and entities compels the court to demand that further testimony be introduced into the record, under oath."

The judge ordered the Akin Gump employees to answer 11 questions by Jan. 8.

They include whether members of the Akin Gump team had a role in electing lawmakers who then voted to make Householder speaker and whether they whipped votes for HB 6 in the House and Senate. The judge also wants to know whether any of the men was involved in multimillion-dollar deposits into Generation Now, a now-indicted 501(c)(4) dark money group that DeVillers said was vital to the criminal conspiracy.

THE MORNING NEWSLETTER

Subscribe now.

HELP US GROW

Make a tax-deductible donation.

This story was originally published by the Ohio Capital Journal. For more stories from the Ohio Capital Journal, visit OhioCapitalJournal.com.

Go here to see the original:

Bankruptcy Judge Orders Lobbyists To Explain Their Role In HB 6 - Patch.com

Ronald Belleno

Tens of millions of people lost their jobs because of Covid-19. Less than half have returned to work. More than 50-percent have not. The pandemic has hit the restaurant, travel, bar, retail and beauty industries the hardest.

If you have become re-employed but are carrying high debt, bankruptcy can protect your income, assets and provide relief. If you are still out of work, bankruptcy can protect your assets.More importantly, it will help with your credit score which will assist in obtaining employment.

The smaller job market has resulted in employers being more selective with applicants. Your credit score is a significant part of that selection process.

The decision to file for bankruptcy is a difficult and emotional one. However, if you qualify to file for bankruptcy, it is almost always the right decision for you and your familys future. In more than 30 years of helping people achieve a brighter financial future with the help of bankruptcy laws, I have never had one client tell me it was the wrong decision.

While bankruptcy may initially, negatively affect your credit, its impact may not be as detrimental as some think. Most people who qualify to file bankruptcy already have delinquencies, high credit balances, liens, judgments, foreclosures and or other issues that are negatively affecting their credit.In most cases, these individuals are not able to obtain financing or better employment. Bankruptcy does not make this worse.

Bankruptcy creates a clean slate allowing one to start rebuilding their credit immediately. This will make it easier to obtain credit and qualify for better employment.

It is possible to improve your credit score relatively quick, but you must first resolve your outstanding debt. Seeking professional advise can help you resolve your debt and better understand your credit report so you can improve your credit score, lower your expenses and provide a better quality of life for your family.

Bankruptcy is not the end of your financial life, it is the beginning of a better, brighter, financial future.

Ronald K. Bellenot Sr. is an attorney withBellenot & Boufford LLC, 814 Main St. in Monroe. His areas of practice include bankruptcy law, criminal law, personal injury, real estate, business/professional consultant and foreclosure.

Follow this link:

Bankruptcy is not the end of your financial life - The Monroe Sun

J.C. Penney is almost at the end of its bankruptcy after getting a verbal confirmation Tuesday of its plan from U.S. Bankruptcy Court Judge David Jones.

That plan of reorganization includes the sale of the retail company to landlords Simon and Brookfield and a big chunk of its real estate to lenders to pay down debt. The pending transaction includes a complex document for the transfer of 160 stores and six distribution centers to Penneys lenders.

The sale, which has missed several deadlines, is expected to close Wednesday, Penneys lawyer Josh Sussberg said during the hearing.

Penneys shareholders continued to object to the plans treatment of their rights to future claims, their lawyer Mathew Okin said at the hearing. In response, Judge Jones granted shareholders pre-petition claim status, giving them future rights if they pursue a legal case. The judge deemed himself the gatekeeper of that status but noted that any shareholder claims would be dwarfed by creditors who have agreed to the plan of reorganization.

Penneys shareholders are holding stock with no value but havent accepted that the bankruptcy plan has canceled their equity. Jones had allowed them to form an ad hoc equity committee and approved funds to pay fees for financial and legal assistance.

At that time, Jones had said he was doing it so shareholders could be satisfied of their status in this case. Its very rare for shareholders, who are at the end of the line in the pecking order for payment of claims, to receive any payout from a bankruptcy.

Based on letters he has received, Jones said, A lot of people still dont understand this process.

Jones scolded shareholders for unfairly attacking lawyers and financial advisers in the case, saying some of them have promoted conspiracy theories.

Im ashamed I live in a country where people are unfairly targeted, Jones said. Im ashamed of some of you. I want us all to be more accepting.

Penneys lawyer, Sussberg, has been one of the shareholders main targets, as was Penneys investment banker, David Kurtz of Lazard.

Both were involved in the Toys R Us case that ended up in a liquidation, and Sussberg brought up that 2018 case during the hearing Tuesday, saying that they didnt want to relive that and that Penney was saved against all odds.

There was no grand master plan to steal value from shareholders, Sussberg said. Shareholders believed there was more value inside Penney, but they havent been able to prove it.

Sussberg recounted a story from his father when he told him he was holding a valuable baseball trading card. That card isnt worth anything unless someone is willing to pay you for it.

Twitter: @MariaHalkias

Looking for more retail coverage? Click here to read all retail news and updates. Click here to subscribe to D-FW Retail and more newsletters from The Dallas Morning News.

See original here:

J.C. Penney gets a verbal confirmation of its bankruptcy plan from judge as sale remains pending - The Dallas Morning News

In a Tuesday, Nov. 24, ruling on the case of Pleasant Valley Corp., a debtor related to the FirstEnergy Solutions' bankruptcy in Akron, Judge Alan Koschik of the U.S. Bankruptcy Court Northern District halted a big payment to the lobbying firm Akin Gump Strauss Hauer & Feld.

Koschik said before he releases $2.8 million in fees claimed by the firm, he first wants Akin Gump's statehouse lobbyists to answer questions related to their potential involvement with House Bill 6.

That's the state law that provides former FirstEnergy Corp. nuclear and coal plants with $150 million a year in subsidies, with most of the money going to the Perry and Davis-Besse nuclear plants. It has since become the center of the largest bribery case in Ohio history.

In light of the federal prosecution and an ongoing investigation into bribery behind the 2019 energy law's passage and the arrest in the case of former Ohio House speaker Larry Householder Koschik said he wants to learn what four individuals who led Akin Gump's "Ohio statehouse team" did to earn $2.8 million for state lobbying work while the law was being considered.

"Based on the Court's review of the Debtors' invoices and time records, the Court's questions center on the work of four Akin Gump professionals: Sean G. D'Arcy, Henry A. Terhune, James R. Tucker, and Geoffrey K. Verhoff," Koschik wrote. "These professionals appear to be Akin Gump's 'Ohio statehouse team,' or at least the leaders of that team, and the 'boots on the ground' of the Akin Gump government relations operation in Columbus. They have never appeared in this Court during these Chapter 11 cases. Based upon the Court's review of the docket, they have never made written declarations in these cases.

"However, according to Akin Gump's invoices submitted in support of that firm's applications for compensation, these were the timekeepers involved who interacted with currently-indicted individuals or entities in the service of the Debtors."

In his order directing the four to make sworn statements in the case, Koschik stated what he wants to know. His list of questions for the four includes the following:

Generation Now is the nonprofit dark money group that paid for ads in support of HB 6. It also was indicted and pleaded not guilty to charges of taking part in the bribery scheme while being controlled by Householder.

It's not the first time Koschik has had to deal with fallout from the scandal, and alleged criminal enterprise in state government in the case, while dealing with Akin's fees.

In the Nov. 24 order, he referenced a hearing from the summer: "On the morning of July 21, 2020, minutes before the Hearing began, the Court became aware through published news reports that the United States Government had arrested and filed a criminal complaint against the Speaker of the Ohio House of Representatives, Larry Householder, along with certain other associated individuals," Koschik wrote.

Koschik has invited federal prosecutors to enter the case, at least to file something indicating whether they object to payments that might be related to their case.

In September, Koschik entered an order stating he would presume the federal government did not oppose to the payment of Akin Gump if federal officials did not act in the case. They did not.

He resumed the hearing Nov. 17 and "the United States again did not appear and did not file any objection or statement. The Court therefore presumes that the United States does not oppose the Final Fee Applications," Koschik wrote in the new order.

Koschik approved Akin Gump's fee application on an interim basis in the Nov. 17 hearing, but now wants to hear testimony from Akin Gump's statehouse four.

"Notwithstanding the lack of opposition from the United States, the Court remains concerned about the value provided to the Debtors in connection with their state-level lobbying work in Ohio, given the apparently expanding federal investigations, civil and criminal, regarding the passage of HB 6," Koschik wrote.

The court also has heard opposition to payment of the Akin Gump fees from outsiders, including Jeff Barge, a citizen advocate in Cleveland who filed an objection to the payments in August.

"It is too early to know for a fact to what extent Akin Gump participated in this racketeering 'Enterprise.' What is clear is that, once paid, this money would be awfully difficult to get back," Barge wrote then.

Akin Gump's director of communications, Benjamin Harris, said via email that the four Akin Gump employees mentioned by Koschik are aware of his new order, as is the firm. "Akin Gump is aware of the Court's order and will readily provide additional information to facilitate approval of the firm's fees," Harris wrote in response to questions on the matter.

Koschik said he will resume hearing the matter on Jan. 19.

Excerpt from:

Bankruptcy judge halts $2.8 million payment to Akin Gump - Crain's Cleveland Business

Roberto Alvo, LATAMs CEO, said that the company would exit its Chapter 11 reorganization at some point during the second half of 2021. He added that the USs bankruptcy filing will allow LATAM to be more competitive and go one-on-one with low-cost operators. But what else do we know? Lets investigate further.

During a webinar in Chile, Roberto Alvo spoke about the outlook for Chilean carriers going into 2021. He joined Estuardo Ortiz, JetSMARTs CEO, and Jos Ignacio Dougnac, Sky Airlines CEO.

He said that 2021 will be a recovery year, but it will have its ups and downs. According to the airline, LATAM is operating at a 33% capacity and expects to end the year near 40%.

Meanwhile, the airline continues its process under the Chapter 11 bankruptcy in the US. Last quarter, the New York City court approved LATAMs DIP Financing for US$2.45 billion. Among the three Latin American carriers that are under Chapter 11 bankruptcies, LATAM received the largest funding. And the airline is confident about its future. Alvo said,

We are going to exit Chapter 11 strengthened. We will have a competitive cost structure, similar to the ones held by Sky and JetSMART, which will allow us to seize more opportunities. LATAM expects to exit its Chapter 11 reorganization during the second half of 2021.

While the company hasnt formally presented its reorganization plan, we knew LATAM would shrink in size. It already has.

In May, LATAM announced the rejection of 19 leasing contracts. It reduced its fleet by returning six long-haul widebody jets and 13 narrow-body Airbus models. Then, in September, it was reported that the airline planned to offload 19 more Airbus A320 family leases.

Still, the final size of the fleet is unknown. In its third-quarter results, LATAM stated that it is currently evaluating the adequate fleet needs for the following years. LATAM ended the quarter with a total fleet of 317 aircraft. Of these, 102 are under operating leases, and 215 belong to the airline.

In the third-quarter, LATAM reduced its expenses by 55%. It managed to reduce its wages and benefits payments by 56%. The airline, like many others, has furloughed people across its several branches. It even closed its regional domestic carrier LATAM Argentina.

According to a study made by Paul Stephen Dempsey in 2012, an airline bankruptcy process averages 714 days. If LATAM does come out of its Chapter 11 in the second half of 2021, it would do in record time, compared to the average process.

Moreover, big airlines such as LATAM have better survival rates due to the common phrase, too big to die. Dempsey wrote,

Large airlines have an interesting advantage over small airlines in bankruptcy. Because large airlines typically have large inventories of leased aircraft and large amounts of debt owed to various creditors, those lenders have the biggest stake in the success of the bankruptcy reorganization and are most likely to provide the DIP financing and concessions necessary for reorganization. The threat of a large airline to return aircraft to lessors in a soft market can instill financial generosity in the cold heart of a lessor.

In the post-COVID environment, the final sentence is more accurate than ever.

How do you see LATAMs Chapter 11 progressing in the future? Let us know in the comments.

Visit link:

LATAM Expects To Exit Chapter 11 Bankruptcy In 2021 - Simple Flying

Bankruptcy filings in the United States were expected to soar during this years economic recession, induced by COVID-19. Instead, they dropped 27 percent year-over-year through August, driven by an unexpected drop in consumer and small business filings.

The findings defy modern economic patterns. Consumer bankruptcies usually climb alongside unemployment rates as filers seek to discharge debt and get a fresh start, write the authors of the new working paper Bankruptcy and the COVID-19 Crisis.

Historically, the number one cause of consumer bankruptcy filings is job loss. This year, we saw the highest rates of job loss since the Great Depression, says co-author Raymond Kluender, an assistant professor in the Entrepreneurial Management Unit at Harvard Business School. At the same time, we saw a decline in consumer bankruptcy filing ratesand not an insubstantial decline.

So that was very surprising to a lot of people. And I think it raises a lot of questions, says Kluender, who studies the causes of financial distress among American households and how government, private insurance, and credit markets should function to insure those risks.

The papers authors also include Jialan Wang and Jeyul Yang of the University of Illinois, Urbana-Champaign, and Benjamin Iverson of Brigham Young University.

The authors compiled individual bankruptcy filings from January to August using court records through the federal Public Access to Court Electronic Records (PACER) and the Federal Judicial Center (FJC) databases. PACER records bankruptcy filings within 24 hours and FJC keeps historical data.

Researchers looked at filings in three main categories: Chapter 7, used by consumers and small businesses to discharge debts; Chapter 11, used for reorganization generally by larger corporations to pay creditors over time; and Chapter 13, which allows the filer to keep property and repay debts over three to five years.

Personal, or consumer, bankruptcies dropped 28 percent year-over-year. Chapter 11 business bankruptcies climbed 35 percent year-over-year and by 194 percent for corporations with more than $50 million in assets. However, when small businesses are included, total business bankruptcies fell 1 percent.

While media reports have focused on the record number of filings among corporations with more than $1 billion in assets and spikes in filings among retail and dining firms, overall bankruptcy filings are down, the authors write.

Chapter 7 consumer filings fell by more than a third from mid-March through April and continued to stay at levels 20 percent to 30 percent below last year through August. The lower levels are evidence that this isnt a typical recession, the authors report.

The historical relationship between unemployment claims and bankruptcy filings suggested there would have been more than 200,000 additional consumer bankruptcy filings in the second quarter alone. Instead, there were 81,000 fewer. For January through August, there were 139,000 fewer than expected.

The fact that a lot of people didn't have to make those claims could be read as reassuring. But, at the same time, there might be reasons that people didn't have access to the court system at this time, or they couldn't afford to file, Kluender says.

Two big forces may explain the drop in Chapter 7 consumer bankruptcies, Kluender says.

One may be attorney fees. A Chapter 7 filing costs roughly $2,000, a price tag that potentially shuts out consumers and small businesses when they need debt relief the most. Another could be difficulty in accessing the court system itself as the pandemic worsened and most courts moved proceedings online as a public safety measure, Kluender suggests.

Federal aid from the $1.2 trillion stimulus package, known as the CARES Act, also likely helped many unemployed workers stave off bankruptcy. And state and local governments, federal agencies, and companies enacted policies that put a temporary halt to evictions, foreclosures, and other measures aimed at easing financial strain, the authors note.

Consumer Chapter 13 filings, which are designed to save assets like homes, didnt rebound in April. Through August, those filings hovered between 55 percent to 65 percent below 2019 levels, the researchers found. The authors point to looming foreclosures and evictions as a common trigger for Chapter 13 filings, which could point to the importance of moratoria on these proceedings in helping consumers avoid bankruptcy.

Even the number of business filings were fewer than what researchers would normally expect. In the second quarter, for example, there were 645 fewer Chapter 11 bankruptcies than the 5,500 additional filings the researchers calculated would have been filed based on historical norms.

The drop in business bankruptcies is particularly striking given reports of widespread permanent business closure, the authors write. They cite an estimated 73,000 businesses listed on the review site Yelp shut permanently during the pandemic.

So, what should consumers and policymakers do now as benefits from the CARES Act are running out and a second federal stimulus package is stalled in Congress?

Dont be afraid. Think of bankruptcy as another piece of the social safety net, Kluender says.

Large corporations are not afraid to take advantage of the benefits of the generous debt forgiveness or reorganization that we have available through the US bankruptcy system, Kluender says. I don't think small businesses and consumers should be afraid of taking advantage of those benefits as well, if they are right for them.

Policymakers may want to consider making it easier to file for Chapter 7, Kluender says. In a Chapter 13 proceeding, filers are allowed to finance payments to attorneys through the court-approved repayment plan. That helps avoid the problem of paying attorney fees up front.

If you change the way that Chapter 7 operates so you don't have to pay for your bankruptcy attorney at the time where you are in the most desperate need to file for bankruptcy, [the filer] could instead pay filing and attorney fees over time, Kluender says. That could be very beneficial and allow people who currently can't afford to take advantage of the benefits that they're entitled to through consumer bankruptcy.

Rachel Layne is a writer based in the Boston area.

[Image: iStock Photo]

View original post here:

COVID Was Supposed to Increase Bankruptcies. Instead, They've Gone Down. - Harvard Business School Working Knowledge