COVID Bankruptcies: Filing Bankruptcy During the Pandemic
If you have fallen behind on your bills due to the COVID-19 pandemic, bankruptcy could be an option for you. Here are the details of COVID bankruptcies.
The Basics of Covid Bankruptcies
The COVID-19 pandemic has had a significant impact on the American economy. It has resulted in business capacity restrictions, job losses, and countless expensive accommodations necessary for any business that wants to stay in business.
Unfortunately, this also meant filing bankruptcy for many individuals and businesses that lacked the resources or lost the business they needed to stay afloat. For many companies still in bankruptcy proceedings, the pandemic still needs to be considered in their operations.
Complexities in Bankruptcies Due to COVID-19
At the height of the pandemic in 2020, the Supreme Court, the bankruptcy court, the federal government, and numerous bankruptcy attorney offices temporarily closed or limited their operations, making bankruptcy filing harder than it was ever before.
Responding to the many challenges in filing bankruptcy, the Southern District of Georgia, on June 1, 2021, began conducting in-person bankruptcy court hearings. People and businesses that had filed for bankruptcy could have their cases heard with masks and social distancing precautions observed.
The processes have been simpler for businesses that still need to file bankruptcy through a law firm or a bankruptcy attorney. Filing attorneys are now allowed by some courts to file without presenting original signatures from their clients so that they can accommodate virtual paperwork.
For some courts, bankruptcy cases filed on Chapter 13 or Chapter 7 provisions can be conducted using the phone or other remote means.
As the state of Georgia and the U.S. emerge from the ravages of the pandemic over the past year, there are still many questions on the expectations, accommodations, and procedures around how to file bankruptcy and how these change and to evolve as the pandemic rages.
While some businesses are looking for or considering alternative options, for example, many credit card companies are offering different packages you can consider to survive this bankruptcy. But some companies with poor credit reports and credit history are consulting with the American bankruptcy institute.
Although online sales have sky-rocketed from normal levels during the pandemic, for large corporations, it has brought great depression on board. If you or your business has been affected by a challenging retail environment or pandemic-related shutdowns and are thinking of making the critical decision of filing for bankruptcy, you need to contact a bankruptcy attorney.
At the law offices of Bournakis & Mitchell, we have skilled and experienced bankruptcy lawyers in Cartersville who may be able to help you with your bankruptcy proceedings. Contact us today, and an attorney will be standing by to provide a first-time free consultation on the bankruptcy and court process.
COVID -19 Bankruptcy Relief Extension Act
In March 2021, President Biden signed the COVID Bankruptcy relief extension act to ease filing the bankruptcy. This act has made many changes in the bankruptcy process and has made it easier for small business owners to get through these hard times.
The major constitutes of this act were;
- Businesses with a debt of up to 7.5 million dollars can easily file for bankruptcy under subchapter 5 of chapter 11.
- Amendment in the definition of income in chapters seven and thirteen excludes problems related to coronavirus as a purpose to file for bankruptcy cases.
- Chapter 13 plan calculation of disposable income will not include Coronavirus-related problems.
- Payment plan modification for families and individuals under chapter 13 case and make it up to a seven years plan.
Department Store Chain and Business Bankruptcies Due to COVID-19
From entertainment giants to department store chains, the COVID-19 pandemic has spread havoc and devastation in almost every sector of the American economy.
Reduced entertainment spending, falling consumer demand, and stay-at-home orders mandated many businesses to stay closed. This took its toll on many brick and mortar locations, the vast majority of which had to close stores or hold back on opening new stores until conditions improved.
Many brick-and-mortar businesses that could not adapt or adapt fast enough have had to shut down as they could not afford rent with no customers coming through the door. This had a ripple effect on the real estate market as landlords had to deal with unpaid rent, which meant that a restructuring agreement was necessary.
With no end in sight for the pandemic, many opted to shut down their businesses and companies and file for bankruptcy. This triggered the fear of another Great Recession.
Although the official sector, including the Federal Reserve, has played a key role in minimizing the negative impact of COVID on the business sector, it has still brought ease to a few.
What Stores Are Closing Because of Coronavirus?
Even as some businesses have been shutting down, the American economy has been slowly reopening. Still, social distancing measures have been impacting store and restaurant capacity, making it hard for many physical establishments to make money and get out of debt.
While bankruptcy is a last resort for many debtors, it does not mean that a business or company is going out of business by filing for bankruptcy relief protection.
Bankruptcy is a financial restructuring similar to a foreclosure in real estate that protects debtors’ assets from creditors while allowing the latter to get some of their money back.
Below are some major companies that have filed for bankruptcy in 2021 since the COVID-19 pandemic hit.
Apex Parks operates and owns more than a dozen family entertainment joints and water parks in Florida, California, and New Jersey. The company filed for Chapter 11 bankruptcy even though it communicated that it did not intend to shut down.
FoodFirst Global Holdings
The parent company of the Brio Tuscan Grille, Bravo Cucina Italiano, filed for Chapter 11 bankruptcy in April with tens of store closures expected.
This is a company that runs a chain of movie theaters and also provides dine-in options for movie-goers. The company filed for Chapter 11 bankruptcy when it was in the process of buying Star Cinema Grill.
Rubie’s Costume Company
The self-proclaimed largest manufacturer and designer of Halloween costumes which is in the business of making wigs, costumes, and other festive gear, filed for Chapter 11 bankruptcy.
The gym chain, which filed for bankruptcy in May, operates and owns more than 700 gyms in the United States and worldwide.
The luxury department store chain filed for bankruptcy in May. As one of the oldest traditional department stores in the U.S. that is more than a hundred years old, its filing could portend worse things to come for the retail industry.
The Plano Texas-based retailer, which is also more than a century old and one of the first department stores in the U.S., filed for bankruptcy protection in May. With more people turning to fast fashion and online retailers for shopping, JCPenney, which struggled even before the pandemic, could not withstand the pressure.
Pier 1 Imports
The company is one of the big retailers that filed for Chapter 11 bankruptcy in February. It intends to wind down its business, but the company stated that it could not find a buyer due to the impact of the pandemic. This is not surprising given that the company has more than 900 stores across the U.S.
The company that is known for its rental car services filed for Chapter 11 bankruptcy in May. Hertz owns several other brands, including Thrifty and Dollar, and is on its fourth CEO in six years.
24 Hour Fitness
The gym chain filed for Chapter 11 bankruptcy protection in June. The company stated that it intends to reopen many of its locations as the economy reopens, but more than 130 locations will remain permanently shuttered as part of the restructuring.
A preppy retailer that manufactures clothing for ordinary shoppers and celebrities filed for bankruptcy in May. The company also makes women’s clothing under the Madewell brand.
Lord & Taylor
One of the oldest department stores in the world, the company filed for bankruptcy in August. The company sold to Le Tote, the French retailer, and also sold its flagship New York City location in 2020.
If you are about to file bankruptcy in Carterville or Rome in Georgia, the best course of action you can take is to contact a skilled and qualified attorney to provide legal advice. At Bournakis & Mitchell, P.C., we have experienced attorneys that have helped numerous businesses navigate the bankruptcy process with favorable outcomes.
Filing for Bankruptcy During the COVID-19 Outbreak
In some instances, filing for bankruptcy is the best option to get out of a sticky situation. The outbreak of the COVID-19 pandemic was one of those instances, especially if you were laid off from work or had to shut down your business.
For instance, individuals who were laid off, companies with unsecured debt, or those with unpaid rent arrears they could never hope to pay would be better off declaring bankruptcy.
It is important to note that bankruptcy cases usually call for speed, as the faster you file, the faster you get to rebuild your credit and get back to business.
One of the best things about declaring bankruptcy is that it enables a business or individual to wipe out unpaid rent, medical bills, and credit card balances, among other debt owed. The only thing it seemingly cannot get rid of is student loan debt, newly acquired tax debt, and domestic support payments.
Chapter 7 Bankruptcy After a Layoff
You can use Chapter 7 bankruptcy to get out of debt after being laid off during the pandemic. Since it only takes a few months to process, you will not have to pay anything you owe to creditors, and you get to keep the assets you need to live and work, which is almost everything you own anyway.
Still, it is essential to remember that you will have to give up luxury items such as expensive coin collections, an expensive diamond necklace, and a vacation home to get your debt discharged.
Ultimately, it will be the state that gets to decide what you can keep under Chapter 7 bankruptcy provisions.
Who Qualifies for a Chapter 7 Bankruptcy After a Layoff?
Georgia, like most states in the U.S., usually administers a means test to determine eligibility. To qualify, your disposable income needs to be at or below the median income in the state. Still, there are two exceptions which are:
- If your disposable income is too high, you can be eligible based on the second portion of the means test in which you will be allowed to deduct specified expenses.
- If your debts are primarily business-related, you do not have to be subjected to the means test.
It is important to note that just because you have no income, that does not mean you automatically qualify. The means test is usually applied over the past six months. As such, if you were just laid off from a high-paying job, it would be advisable to wait a few months before you apply.
Filing for bankruptcy during the COVID-19 pandemic can be complicated, which is why you will need to work with a qualified lawyer. An experienced lawyer is up-to-date on all the laws and processes for filing for bankruptcy and will help you file your bankruptcy documentation in a fast and efficient manner.
Contact the law offices of Bournakis & Mitchell, P.C., today, and we may be able to help you file for bankruptcy during the pandemic.
Why Bankruptcies Are on the Decline as Covid Rages
The years 2020 and 2021 will be a time to be remembered for the law on bankruptcy.
When the pandemic hit, there was much scrutiny on the ability of businesses to make use of Chapter 11 bankruptcy processes to discharge their debts in a much less expensive and more efficient manner.
Many debtors took advantage of the provisions. There was a record number of bankruptcy filings as income fell and a reduction in consumer filings as the process became jammed with too many applications.
In 2020, there were more than half a million bankruptcy filings, which is about 200,000 fewer than what was filed in either 2019 or 2018. It was Chapter 11 bankruptcy filings that increased in 2020 by more than a thousand cases to a high of more than eight thousand bankruptcy cases.
Some of the reasons for the drop in bankruptcy cases during the pandemic include:
- The Federal Housing Administration extended the eviction and foreclosure moratorium.
- CARES Act stimulus checks cushioned many debtors.
- Most financial institutions scaled back on vehicle repossessions.
- Increased unemployment benefits offered to laid-off workers increased disposable incomes.
- Closure of courts all over the United States meant that obtaining and implementing judgments was severely curtailed.
- Restrictions on collection agencies on the types of debts that could be collected.
Going forward, the number of bankruptcy filings will depend on whether the Supreme Court will rule to extend the FHA moratoriums, the extension of the CARES Act and SABRA provisions, and how Congress addresses stimulus bills.
Even though COVID bankruptcy filings are declining, that does not mean that we are in the clear. Just because other businesses are no longer in danger does not mean you should sit on your laurels.
If your business is not doing so well, you should contact the attorneys at Bournakis & Mitchell, P.C., who may be able to help you file your papers and avoid digging yourself into a deeper hole.
Bankruptcy Filing Records
Consumer or personal bankruptcies dropped 28 percent year over year in 2021. On the other hand, Chapter 11 business bankruptcies are up 35 percent year over year.
Taking into account businesses with more than $50 million in assets, bankruptcies are up 194 percent. However, including small businesses in the calculation, total business bankruptcies are down 1 percent.
Chapter 7 consumer filings are down more than a third and are between 20 and 30 percent lower than 2020 numbers. This shows that this is not a typical recession. In any other recession, the number of filings is in tandem with unemployment claims which is hardly the case.
According to financial professionals, one of the reasons consumer filings are down could be due to the price tag of a Chapter 7 filing. At about $2000, most small businesses and consumers cannot afford the price tag when they most need debt relief.
Consumer Chapter 13 filings intended to save assets like homes were also 55 to 65 percent below previous levels, which could be a result of the moratoria on evictions and foreclosures.
If you intend to file bankruptcy during the COVID-19 pandemic, it is critical to contact a bankruptcy attorney before filing. At Bournakis & Mitchell, P.C., We have experienced and skilled bankruptcy lawyers in Rome, Dalton, and Cartersville who may be able to help you with your bankruptcy case. Contact us today, and we will have an attorney ready to offer legal advice on how to go forward.