More businesses file for bankruptcy amid coronavirus; experts describe options
NEW ORLEANS, La. (WVUE) - Gold’s Gym, Borden Dairy and J.Crew all recently filed for bankruptcy and many say things are only going to get worse.
As people struggle to make ends meet, many businesses will look for protection from mounting debts.
These are not the kind of parking lots that spell business prosperity and after nearly two months of stay home orders, the lack of foot traffic is expected to force many businesses to file for bankruptcy.
“We haven’t seen an uptick but it’s coming, especially in the energy sector,” bankruptcy attorney John Landis, with Stone Pigman Law, said.
Thousands of businesses struggle with declining revenues and mounting bills which could lead to an increase in Chapter 7 and Chapter 11 bankruptcy filings.
“Chapter 11 is reorganization of a company. it continues to exist after the bankruptcy. Chapter 7 is a straight liquidation,” Landis said.
Attorneys say bankruptcies are an unfortunate fact of life, that should be avoided.
“Bankruptcy is not the happy end of the legal profession this isn’t adoptions,” Fox 8 legal analyst Joe Raspanti said.
To help deal with an anticipated influx of bankruptcies the federal government has taken steps recently to make the process a bit smoother.
“There was a small business re-organization act which went into effect in February,” Raspanti said.
Bankruptcy attorney John Landis says the Cares Act makes it easier and cheaper for small companies to re-organize, by eliminating quarterly payments to trustees and allowing courts to confirm a bankruptcy plan over creditor objections.
“That standard can be met if the disposable income of the small business is disbursed to creditors over three-year period,” Landis said.
Landis says before a company considers bankruptcy it should take advantage of emergency grants, forgivable loans, and refundable tax credits offered under the Cares Act.
“I think they should exhaust all care opportunities if they’re successful maybe they won’t need to file,” Landis said.
But if they do need to file Landis says business owners should hold onto as much cash as possible and keep good records, to help soften the blow and hopefully land on their feet later.
Time Magazine reports Chapter 11 bankruptcy filings rose 18 percent in March alone.
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