April 2020

Pandemic Relief Fails Small Businesses

April 28, 2020August 26, 2021 Martin

The Coronavirus Aid, Relief, and Economic Security (CARES) Act is the largest aid package in U.S. history. The bipartisan deal allocates $2 trillion in relief efforts to mitigate the crisis resulting from the COVID-19 pandemic. This includes $500 billion in loans – $454 billion of which was allocated to the Federal Reserve for additional lending. The CARES Act, and its disaster relief programs, has caused great upset among lawmakers and small business owners. They’ve been inundated with complaints about breakdowns in the small-business lending program and loopholes that have allowed large companies to receive funds meant for smaller operations. Lawmakers are now looking for solutions to the mounting legislative shortcomings.

The day after lawmakers spoke with the head of the Small Business Administration about the issues with the small business program, Congress passed another huge relief bill with little done to address the early problems that have emerged. Many have speculated that decisions are influenced by lawmakers’ desire to be favored in November elections. They will be perceived negatively if their solutions to the pandemic are unsuccessful or driven by powerful interests. These factors are increasing the urgency to fix what isn’t working. Here’s a look at the growing breakdowns of rescue efforts and the consequences for small businesses thus far.

The $350 billion fund for small businesses was quickly depleted and it became apparent that large, publicly traded companies had received much of the funds. Lawmakers and the public were outraged by this injustice. Similarly, many have been frustrated over the cost of provisions in the stimulus plan, allowing wealthy business owners to take advantage of the program by qualifying for tax refunds.

Additionally, many small business owners have had difficulty obtaining the approved loan funds or getting approved through major banks. “Promises were made in the CARES Act that made small businesses believe they would receive their loans in a timely fashion,” Rep. Pete Stauber (R-Minn.) says, “Instead, some received a fraction of what they were promised and many others received nothing at all.”

And there might be even more delays coming, though Congress sent another $320 billion into the so-called Paycheck Protection Program last week. Banks warn the money could run out in a matter of days with hundreds of thousands of applications still pending.

To delve deeper into the specifics, about 70% of U.S. small business owners have already applied for emergency loans, according to an industry survey released Thursday. A report by the trade group says the program, largely operated by banks, and a second operated by the SBA to provide immediate cash while struggling businesses wait on loan approvals, “have yet to deliver the loans, frustrating small business owners who are in immediate need of financial support.” The survey found that just over half of small businesses have applied for the SBA’s smaller disaster loan program but that just 4% had been approved. The survey reinforces the concerns of banks and small-business owners that the $349 billion Congress set aside for the Paycheck Protection Program will quickly be exhausted. The path forward for additional federal intervention is uncertain as the virus continues to wreak havoc on the economy.

Sen. Marco Rubio (R-Fla) said on Twitter “…#PPP will stop & no more #PPPloans will be made, leaving millions of #smallbusiness locked out.”

Rep. Mary Gay Scanlon (D-Pa.) echoes this sentiment saying, “Our constituents have a lot of questions about where the hell this $3 trillion is going and why it isn’t coming into their pockets,”

The federal government restarted the emergency loan program on Monday with $321 billion in funds. But the Paycheck Protection Program, first opened on April 3 with $349 billion, was a pot of money that ran out in 13 days.

Still, small businesses can’t seem to catch a break. On the first day of the reopened Paycheck Protection Program, banks reported that the Small Business Administration’s portal was not functioning and would not allow them to enter loan application information required for small businesses to access the program.

“We have been attempting to access E-Tran since 10:30 and have had no luck,” said Maria Amoruso, chief marketing officer at Pennsylvania’s NexTier Bank, in a midday message to NPR.

Amoruso said her bank had 13 small business loan applications ready on Monday morning. As of midday, her team had only been able to get one loan entered into the system.

This is yet another reason why the small business loan program has fallen short of providing desperately needed aid in a timely manner.

Rob Nichols, CEO and president of the American Bankers Association (a trade group that represents banks) tweeted out, “Our member banks across the country are deeply frustrated at their inability to access @SBAgov’s E-Tran system,” he tweeted. “We have raised these issues at the highest levels. Until they are resolved, #AmericasBanks will not be able [to] help more struggling small businesses.”

Until the multitude of issues with the roll-out of the second disaster relief package have been resolved, unfortunately, several small businesses will not receive the financial assistance they need in time to survive this economic crisis. In light of the failing system, businesses are having to look at alternative options to weather the storm.

The expert attorneys at JLG Lawyers will explain the various options available, and help to create a customized plan that can relieve or reorganize debt. To get more information about debt settlement or filing for a business bankruptcy, contact Michael Jaurigue at 818-630-7280 or info@jlglawyers.com for a free consultation today.

The PPP program is poised to get an additional $300 billion, but many small businesses will never see it.

April 22, 2020August 26, 2021 Martin

For many small businesses struggling to survive the fallout of the coronavirus pandemic, the only hope of staying afloat until a potential reopening was a Paycheck Protection Program (PPP) loan.

But the PPP exhausted nearly $350 billion set aside under the CARES Act for low-interest loans to small businesses. On Tuesday, the Senate passed a measure that would inject an additional $300 billion into PPP. As part of the $2.2 trillion coronavirus stimulus package, known as the CARES Act, $349 billion was allocated to small businesses, initially as loans. PPP, administered through the Small Business Administration, was authorized to provide small businesses with loans to pay eight weeks of salary, benefits and other eligible costs. Those loans will be forgiven if a business restores its full-time employment and salary levels by June 30.

Many small businesses jumped at that opportunity, and within 13 days the funds were gone. On Tuesday, the Senate approved a $484 billion relief package that includes an additional $310 billion for PPP. President Donald Trump is likely to approve the package, which also includes more funding for hospitals and coronavirus testing. The Senate’s package is in line with what Treasury Secretary Steven Mnuchin said he was discussing with Democratic leaders over the weekend.

Here are some other possible options:

1. Venture-capital funding

Unlike with a loan, businesses that receive venture-capital financing aren’t typically responsible for paying it back. The downside is that they often have to forfeit a portion of their control. But for “smaller and mid-sized business that had existing relations with venture capitalists and never dipped toe in water, I could see venture capitalists being interested,” Prosen said. “They could even get a good discount without giving away a ton of control.”

It may be more difficult to get a loan from traditional sources now that banks and other financial intermediaries have begun to tighten their lending standards, said Eric Pendleton, the principal at Pendleton Financing, a commercial lending business based in Boston. Some lenders, he added, have stopped lending completely to higher-risk borrowers.

2. Employee-retention tax credit

“PPP is definitely the largest program right now, but it’s not the only option,” said Jared Hecht, the CEO and co-founder of Fundera, a marketplace for small-business loans. He cited the employee-retention tax credit recently introduced as part of the CARES Act to encourage employers to keep workers on payroll.

4. Crowd-sourced funding

IFundWomen, a startup funding platform co-founded by Kate Anderson, helps women obtain the capital they need to launch or operate their business through crowdfunding and grants. The number of members tripled in March and there are now over 108,000 members, including funders and entrepreneurs.

IFundWomen launched a COVID-19 relief campaign so that funders can easily identify businesses that are struggling to get by during this time. Crowdfunding, while not as reliable as the PPP program, can help companies keep their lights on “without giving away equity,” Anderson said.

The platform operates in a similar manner to sites like GoFundMe. However, IFundWomen is specifically a crowd-funding platform dedicated to funding female-owned businesses.

Nearly 30% of all small businesses are owned by women; however, they receive only 16% of conventional small-business loans and 17% of SBA loans, according to a 2014 report by the Senate Small Business and Entrepreneurship Committee.

5. Look to family and friends

This is an option of last resort. A loan from relatives or friends will typically come with less fine print and arrive in wallets faster, Prosen said.

Given that 22 million Americans are out of work, however, don’t bank on this option, said Holly Wade, the director of research and policy analysis for the National Federation of Independent Business, a nonprofit small-business association.

Family and friends may be hesitant to dip into their own savings at this time, especially given the heightened uncertainty regarding the U.S. economic outlook, she said. What’s more, mixing business with friendship and family can often lead to broken relationships, experts say.

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We understand debt settlement and bankruptcy is a challenging topic to face both financially and emotionally. The processes can become very complicated in a system that is difficult to navigate and frequently changes. Consulting with a good lawyer as soon as possible is incredibly important to the success of your debt settlement or bankruptcy strategy. At JLG Lawyers we offer solutions to help advise you and answer questions all the way to a full attorney handled case. Contact us now for a free case review and strategy session.

JLG Lawyers and Michael Jaurigue, Esq. are located in Glendale, California and specialize in debt settlement and bankruptcy matters. Michael Jaurigue is a UCLA and Berkeley Law graduate and has been practicing law for 20 years in Los Angeles and worked at Sheppard, Mullin, Richter, and Hampton representing several Fortune 100 clients prior to forming his own firm 10 years ago. JLG Lawyers is located at 300 W Glenoaks Blvd. Suite 300, Glendale, California 91202. 818-630-7280.

Small Business Bankruptcy Act Effective March 20, 2020 Aimed at Streamlining Chapter 11 Reorganization.

April 22, 2020August 26, 2021 Martin

On March 20, 2020, Congress approved, and earlier this month the President signed, the Small Business Reorganization Act of 2019 (SBRA 2019) which streamlines existing rules governing the efforts of small businesses to restructure successfully under Chapter 11 of the Bankruptcy Code. The law effectively makes it more difficult for creditors to contest small business Chapter 11 cases, but it also provides creditors in all bankruptcy cases several major benefits through changes to the preference laws. The timing couldn’t be better with the COVID-19 pandemic affecting virtually every small business and creating financial hardships requiring assistance like Chapter 11 protection.

Subchapter V of Chapter 11.

A small business debtor is a business entity or individual which is engaged in business whose aggregate non-contingent debts (excluding debts to affiliates or insiders) do not exceed $2,725,625 and which elects to be treated as a small business. The Act adds a new subchapter V to Chapter 11 of the Bankruptcy Code to make it easier and less expensive for small businesses to successfully reorganize.

The Act’s key provisions include:

Only the small business may file a Chapter 11 plan, but the Act requires that the debtor file its plan within 90 days of the date it files its bankruptcy petition, except in certain circumstances;
A standing trustee similar to those appointed in Chapter 13 cases will be appointed to oversee each small business case;
A creditors committee will not be formed;
The Chapter 11 plan can modify the rights of a creditor secured by a security interest in the debtor’s principal residence if the loan secured by the residence was not used to acquire the residence but was used in connection with the debtor’s business;
The Court can confirm a debtor’s plan without the support of any class of claims as long as the plan does not discriminate unfairly and is deemed to be fair and equitable with respect to each class of claims;
To be fair and equitable, the Chapter 11 plan must provide that all of the debtor’s projected disposable income to be received during the length of the plan will be applied to make payments under the plan for a period of 3 to 5 years.

As in all Chapter 11 cases, creditors will need to be vigilant to ensure that Courts properly evaluate Chapter 11 plans, especially those that lack creditor support, and that their rights are properly protected.

Changes to Preference Laws.

The Act makes several significant changes to existing preference laws which will be welcomed by creditors. Currently, trustees and debtors in possession have broad authority to file lawsuits to recover preferential transfers which were made 90 days prior to the date the bankruptcy case was filed, or in the case of insiders, one year. In addition, under the prior law if the amount of the transfer was less than $13,650, then the trustee or debtor in possession would have to file the lawsuit to recover the transfer in the federal district where the defendant resides, not in the district where the bankruptcy case is pending. The Act raises the threshold for non-insider defendants from $13,650 to $25,000 so that claims of less than $25,000 must be filed in the district where the defendant resides. In addition, the Act adds as a requirement that, before filing the lawsuit to recover a preference, the trustee or debtor in possession must exercise reasonable due diligence and must “. . . take into account a party’s known or reasonably knowable affirmative defenses . . .”. Due to costs and logistics, preference suits are rarely filed outside of the district where the bankruptcy case is pending, so raising the threshold to $25,000 effectively immunizes most transfers less than $25,000 from recovery. In addition, the Act’s due diligence requirement will certainly result in a reduction of the number of preference lawsuits.

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Famous Celebrities You May Not Have Known Filed Bankruptcy Including Wayne Newton, MC Hammer, Mark Twain, and More.

April 22, 2020December 4, 2024 Martin

Bankruptcy Is More Common Than You Think.

During these uncertain times it is easy to get lost in the day to day negative press and lack of clarity about the future. It’s important to take everything in stride and realize that financial difficulties happen to the best of us, and should be looked at as a starting point of a new, successful journey. People facing financial difficulties often feel like they are the only ones having money troubles. They often feel embarrassed and isolated from the rest of the community. They are reluctant of file for bankruptcy because they are afraid they will be considered failures and irresponsible by the public. They do not realize that many people, including famous celebrities, have faced similar financial difficulties and filed for bankruptcy to discharge their debts. This article will discuss some of these famous people including artists, athletes, authors, actors and businessmen who filed for bankruptcy.

Rembrandt Haremenszoon Van Rijn, 1606-1669, the famous Dutch painter, accumulated more debts than he could repay and filed for bankruptcy at the age of 50 in 1656. Jacob Peter Thomasz, a lawyer, supervised the sale of his assets in 1657 and 1658. Many of Rembrandt’s paintings and his house were sold at an auction. After the bankruptcy, he continued to paint but was not allowed to fsell his works directly to customers. He was able to circumvent this law by having his son take over his business and sell his paintings.

Phineas Taylor Barnum, 1810-1891, the greatest American showman, filed for bankruptcy in 1871 due to losses he incurred in unwise business ventures. After bankruptcy he organized his famous circus, “The Greatest Show On Earth.” In 1881 he merged his circus with his most successful competitor, James A. Bailey, under the name of Barnum and Bailey Circus.

Mark Twain, (Samuel Langhorne Clemens), 1835-1910, pre-eminent American author, lost most of his money investing in a worthless machine called the Paige Compositor, an automatic typesetting machine. He filed for bankruptcy in 1894 and discharged all his debts, but was determined to repay the debts. He knew he could earn money by giving lectures to large audiences, so he traveled to Europe and spent the next four years lecturing in every major city. He used the proceeds from these lectures to repay all his debts. He also wrote several of his more famous books after filing bankruptcy including Pudd’nhead Wilson and Following the Equator.

Mathew Brady, 1823-1896, distinguished Civil War photographer, filed for bankruptcy in 1872 in Washington, D.C. when, after the Civil War, people lost interest in his work and he became unable to pay his business fdebts. Three years after he filed for bankruptcy the United Stated War Department agreed to purchase part of his photography collection for $25,000.00. He then reopened his gallery and was successful in attracting new clients for his work.

Henry John Heinz, 1844-1919, condiment manufacturer, started his company in 1869 selling horseradish, pickles, sauerkraut and vinegar. In 1875 the company filed for bankruptcy due to an unexpected bumper harvest which the company could not keep up with and could not meet its payroll obligations. He immediately started a new company and introduced a new condiment, tomato ketchup to the market. This company was, and continues to be, very prosperous.

Oscar Wilde, 1854-1900, acclaimed poet and author, was forced into bankruptcy in 1895. He had earlier been convicted of homosexual activity, which in England was illegal at that time, and was sentenced to two years in prison at hard labor. He was declared a bankrupt on November 12, 1895 and his property was auctioned off. After being released from prison he published his poem, The Ballad of Reading Gaol. His health was affected by his prison experience and he died at the age of 46.

Milton Snavely Hershey, 1857-1945, founder of Hershey’s chocolate, started four candy companies that failed and filed bankruptcy before starting what is now Hershey’s Foods Corporation. Mr. Hershey had only a 4th grade education, but was certain he could make a good product that the public would want to purchase. His fifth attempt was clearly successful.

Henry Ford, 1863-1947, automobile manufacturer, first two automobile manufacturing companies failed. The first company filed for bankruptcy and the second ended because of a disagreement with his business partner. In June 1903, at the age of 40, he created a third company, the Ford Motor Company with a cash investment of $28,000.00. By July of 1903 the bank balance had dwindled to $223.65, but then Ford sold its first car, and as they say the rest is history.

Mickey Rooney, 1920- , movie actor, blames alcohol and gambling for the financial problems he suffered in the early 1960’s. He owed the Internal Revenue Service $1.75 million and filed for bankruptcy in 1962. After the bankruptcy he continued to act and has had many roles in movies and television. He is still performing live shows today.

Debbie Reynolds, 1932- , movie actress, purchased a hotel in Las Vegas in 1992 and called it the Debbie Reynolds Hotel and Casino. She thought she could operate the hotel successfully, however, it was plagued by a weak cash flow almost from the start. In July 1997 the hotel filed for Chapter 11 bankruptcy and Ms. Reynolds filed for personal bankruptcy. The hotel was sold at auction in 1998 to the World Wrestling Federation.

Johnny Unitas, 1933-2002 , legendary Hall of Fame football quarterback, was a great athlete but a terrible businessman. Each of his business ventures, including bowling alleys, land deals and restaurants, was unsuccessful. He filed for Chapter 11 bankruptcy in 1991. Other football players who filed for bankruptcy include Tony Martin and Lawrence Taylor.

Jerry Lee Lewis, 1935- , famous Rock n’ Roll star, filed for bankruptcy in 1988 because of huge tax debts. The IRS seized his cars, furniture, baby grand piano and even showed up at his concerts to collect ticket sales. He has since recovered from bankruptcy and still gives live concerts.

Burt Reynolds, 1936- , movie actor, filed for bankruptcy in 1996 in Florida after his much publicized divorce from Loni Anderson. He had more than $10 million in debt. His dinner theater was foreclosed on by the mortgage lender and his ranch was sold. Since his bankruptcy he has continued to act in movies and was awarded the Golden Globe for Best Supporting Actor in the film Boogie Nights.

Sherman Hemsley, 1938-2012) , TV actor who played George Jefferson in All in the Family, filed for Chapter 13 bankruptcy in June of 1999. He did not have sufficient funds to repay a $1 million loan from a Las Vegas investment corporation and pay taxes he owed to the IRS. He later dismissed the case and worked out his debt outside court.

Marjorie Margolies Mezvinsky, 1942- , former member U.S. House of Representatives from 1993 to 1995, filed for Chapter 7 bankruptcy in February 2000. She was denied a discharge however because she failed to satisfactorily explain and disclose what happened to all her assets.

Wayne Newton, 1942- , Las Vegas entertainer, filed for Chapter 11 bankruptcy in 1992 listing more than $20 million in debt. A few years later he signed a new contract with Stardust Hotel which pays him reportedly over $25 million per year for performing at the hotel 40 weeks a year for 10 years.

Kim Basinger, 1953- , actress, earned so much money from her movies that she was able to purchase the town of Braselton, Georgia. After the purchase she was sued for breach of contract for pulling out of the movie, Boxing Helena. She was not able to pay the damages resulting from the suit and filed for bankruptcy in 1993. As part of her bankruptcy she sold the town. She later married Alec Baldwin, had a child and won an Oscar for her role in the movie L.A. Confidential.

MC Hammer (Stanley Burrell) 1962- , musician and entertainer, filed for Chapter 11 bankruptcy in 1996 because he did not have the income to support his lavish lifestyle and defend all the lawsuits that were filed against him.

Walt Disney, 1901-1966, cartoon creator, filed for bankruptcy in 1920 after his main client of his new business filed bankruptcy. Disney said he could no longer pay his employees or the rent and had no choice but to file bankruptcy himself. In 1923 her formed a new company with a loan from his parents and his brother. In 1928 her created “Mickey Mouse” and the rest is history.

Larry King, 1933-, talk show host, filed for bankruptcy in 1960 and then again in 1978. He said each time that he was deep in debt.

Donald Trump, 1946-, businessman, filed a Chapter 11 bankruptcy case for his casino empire in 2004 to reorganize his business after negotiations with his creditors failed. This was the second bankruptcy case for his casino business, in 1992 he had filed Chapter 11 bankruptcy for his casino business. He is now the President of the United States.

Mike Tyson, 1965-, professional fighter, filed a Chapter 11 case in August of 2003 because he was not able to pay all his bills.

Sammy Kershaw, 1958- , country music singer, filed a Chapter 13 bankruptcy case in February 2007. He had some major hits during the early 1990’s, but nothing recently. He was facing financial difficulties with a restaurant he owned.

Stephen Andrew Baldwin, 1966-, actor, played in movies such as The Beast and Born on the Fourth of July and was Barney Rubble in the Flintstone’s Viva Rock Vegas. In 2008, he was on TV in Donald Trump’s Celebrity Apprentice. He is also a minister and appears weekly on a Christian radio show. He filed for Chapter 11 on July 21, 2009 after he defaulted on his mortgage loan. He claims to owe more than $2.3 million in debt.

Jose Conseco, 1964-, baseball player, born in Cuba and moved to the U.S. as an infant with his family. In 1988, he became the first player in major league history to hit 42 home runs and steal 40 bases in the same year. In 2005 he admitted to using anabolic steroids. In 2008 his house was sold at foreclosure and he filed for Chapter 7 bankruptcy.

Vince Neil (Wharton), 1961-, singer, He joined the band Motley Crue in 1981 and recorded such hits as Dr. Feelgood and Girls, Girls, Girls. In 1992 he left Motley and went solo recording Exposed, which debuted at number 13 on the Billboard charts. In 1995 his daughter died of childhood cancer of the kidneys ad he established the Skylar Neil Foundation in her honor. It funds cancer research. In 1998 he filed for Chapter 7 bankruptcy, but was later not satisfied with his bankruptcy lawyer and thought he was negligent in handling his case. The judge refused to reopen the case. Mr. Neil has since started several business ventures.

Anna Nicole Smith, (1967-2007), former playmate model, filed bankruptcy in 1996 as a result of an $850,000 judgment against her, as she was left without funds following the death of her wealthy elderly husband, J. Howard Marshall. The Supreme Court recently issued an important ruling in her bankruptcy case in which it held that bankruptcy court judges may not rule on non-bankruptcy law matters.

Abraham Lincoln, (1809-1865), 16th President of the United States of America, declared bankruptcy in 1833 because of a failed business. He was required to repay his creditors over a period of 17 years, much longer than the maximum requirement in a Chapter 13 today, which is 5 years.

George McGovern (1922-2012) former presidential candidate, filed a bankruptcy case for his business in 1991. He had invested in a hotel in Connecticut which failed.

Cyndi Lauper, (1953- ), singer, filed bankruptcy in 1981 after splitting up with her band, Blue Angel, and being sued by her manager for breach of contract. In 1984 she released her hit “Girls Just Want To Have Fun.”

Lynne Spears, (1955- ), mother of Britney Spears, filed for bankruptcy in 1998 with her then husband James, just before Britney’s career took off.

Zsa Zsa Gabor, (1917- ), actress, filed bankruptcy in 1933 after a judgment was entered against her for libel for more than $1 million dollars.

Dione Warwick, (1940- ), Grammy award winning singer, filed Chapter 7 in 2013 due to mismanagement of her business affairs and owing more than $7 million to the IRS.

Casey Anthony(1986- ), young mother acquitted of murdering her 2 year old daughter, filed Chapter 7 listing more than $800 thousand in debt.

Janice Dickinson(1955- ), former supermodel and judge on America’s Next Top Model, filed bankruptcy in 2013 due to large medical bills and past due taxes.

Michael Vick, (1980- ), football star, filed for Chapter 11 bankruptcy in July of 2008 while he was still serving time in jail for illegal dog fighting. His plan of reorganization was approved by the court in 2009.

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Life After Bankruptcy, How Does It Affect My Credit?

April 22, 2020August 26, 2021 Martin

Consequences of Bankruptcy

In these uncertain times a large number of people will be facing financial challenges that are scary and often times insurmountable. It is important to research and carefully consider the impact debt settlement or bankruptcy will have down the road. In certain cases bankruptcy may be inevitable, in which case planning is of upmost importance to a successful strategy. JLG Lawyer’s experienced team can help answer questions and map out a strategy that is right for you and your family.

Perhaps the most well-known consequence of bankruptcy is the loss of property. As previously noted, both types of bankruptcy proceedings can require you to give up possessions for sale in order to repay creditors. Under certain circumstances, bankruptcy can mean losing real estate, vehicles, jewelry, antique furnishings and other types of possessions.

Your bankruptcy can also affect others financially. For example, if your parents co-signed an auto loan for you, they could still be held responsible for at least some of that debt if you file for bankruptcy.

Finally, bankruptcy damages your credit. Bankruptcies are considered negative information on your credit report, and can affect how future lenders view you. Seeing a bankruptcy on your credit file may prompt creditors to decline extending you credit or to offer you higher interest rates and less favorable terms if they do decide to give you credit.

Depending on the type of bankruptcy you file, the negative information can appear on your credit report for up to a decade. Discharged accounts will have their status updated to reflect that they’ve been discharged, and this information will also appear on your credit report. Negative information on a credit report is a factor that can harm your credit score.

Getting a Credit Card or Loan after Bankruptcy

Bankruptcy information on your credit report may make it very difficult to get additional credit after the bankruptcy is discharged — at least until the information cycles off your credit report. Lenders will be cautious about giving you additional credit, and they may ask you to accept a higher interest rate or less favorable terms in order to extend you credit.

It will be important to begin rebuilding your credit right away, making sure you pay all your bills on time. You’ll also want to be careful not to fall back into any negative habits that contributed to your debt problems in the first place.

Getting a Mortgage After Bankruptcy

Just as bankruptcy can hinder your ability to obtain unsecured credit, it can make it difficult to get a mortgage, as well. You may find lenders decline your mortgage application, and those that do accept it may offer you a much higher interest rate and fees. You may be asked to put up a much higher down payment or shoulder higher closing costs.

Rather than give up your home and try to get a new mortgage after bankruptcy, it may be better to reaffirm your current mortgage during bankruptcy proceedings. You would be able to keep your home, continue paying on your current mortgage — free of other debts — and stay in your current home.

Bankruptcy Alternatives

When you’re struggling with unmanageable debt, bankruptcy is just one solution; there are others to consider. Most will also affect your credit, but probably not as badly as a bankruptcy — plus, these alternatives can allow you to keep your property, rather than having to liquidate it in bankruptcy proceedings.

Some bankruptcy alternatives you might consider are:

Seek help from a government-approved credit counselor or debt management plan. A counselor can work with your creditors to help arrange a workable plan for repaying what you owe.
Take out a debt consolidation loan. These types of loans can aggregate multiple high-interest, costlier debt into a single, lower-interest loan. Research debt consolidation loans to see if consolidation can lower the total amount you pay and make your debt more manageable.
Approach your creditors and see if they’re willing to agree to a more manageable repayment plan. Defaulting on your debt is not something your creditors want to see happen to you, either, so they may be willing to work with you to arrange a more achievable repayment plan. Settling your debt will have a negative effect on your credit scores.

Be aware that whenever you fail to honor the debt-repayment terms you originally agreed to, it can affect your credit. That said, bankruptcy will still have a more significant negative impact on your credit than will credit negotiation, credit counseling and debt consolidation.

A Last Word About Debt Relief

Whenever you fail to repay a debt as you originally agreed to, it can negatively affect your credit. Some types of debt relief come with consequences that are more damaging and long-term than others. Before you make any decision about debt relief, such as declaring bankruptcy, it’s important to research your options, get reliable advice from a qualified credit counselor, and understand the impact your choices can have on your overall financial well-being.

Regardless of what type of debt relief you choose, you can begin taking better care of your credit immediately by putting simple, responsible, credit-positive actions into practice such as:

Paying all your bills on time.
Avoiding taking on additional debt.
Monitoring your credit report.
Creating and sticking to a personal budget.
Using credit in small ways (such as a secured credit card) and paying the balances in full, right away.

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Personal Debt Analyzing Debt Settlement vs. Bankruptcy. What Is Right For Me?

April 22, 2020April 22, 2020 Martin

In these uncertain times debt can be a scary proposition for anyone. When your debts become overwhelming, you begin searching for relief. Debt settlement and bankruptcy are solutions to the same problem – What are the most direct methods for getting out of debt? — but they can take very different tolls on your future financial well-being. If your debts are so massive that you can’t imagine repaying them, it’s time to consider both options.

Bankruptcy can offer the fastest path out of debt, but the long-term impact on your creditworthiness is severe. A bankruptcy will stay on credit reports from seven to 10 years, which will greatly impede your ability to get a loan, receive a credit card or buy a home. Bankruptcy, which is adjudicated in federal court, either wipes out your personal debt (Chapter 7) or creates a plan for repaying creditors (Chapter 13).

Debt settlement doesn’t require a court filing and, unlike bankruptcy, can often be handled without a lawyer or financial counseling. A settlement is a deal you negotiate with creditors to pay less than the amount owed.

Why would creditors want to settle your debts for less than you owe?

They know that you can always file for bankruptcy, which could eliminate their ability to collect anything from you. So, they are frequently willing to accept less than they are owed through debt settlement.

If you conclude that you can’t even afford debt settlement, bankruptcy could be the best option.

Personal bankruptcy comes in two varieties: Chapter 13 is essentially a payment plan that takes three to five years; Chapter 7 clears your personal debts but comes with potential pitfalls. If you own a home, you will be able to keep it under Chapter 13, though you will need to make mortgage payments after you exit bankruptcy court. Chapter 7 doesn’t offer that guarantee. Some states allow bankruptcy trustees to sell your home to raise money to repay creditors. Chapter 7 also has income limits that requires you make less than your state’s median income for a family your size.

Bankruptcy frees you from debt collection, but the headaches can linger for years. Debt settlement without bankruptcy can take more time, but if negotiated properly can do far less damage to your credit. Understanding the pros and cons of debt settlement vs. bankruptcy and making the smartest choice can have a big impact on your future finances.

Choosing Debt Settlement or Bankruptcy

Impact of Bankruptcy and Debt Settlement on Credit

Both bankruptcy and debt settlement can have an adverse impact on your creditworthiness and can lower your credit, or FICO, score for years. Bankruptcy, no matter which chapter you file under, is certain to bring down your score. The better your score is to begin with, the more it will drop.

A Chapter 7 bankruptcy remains on your credit report for 10 years from the date of filing; a Chapter 13 stays on the report for seven years. Accounts associated with a bankruptcy or debt settlement are removed from your report seven years after they initially become delinquent.

Bankruptcy laws regulate what happens to your money when your case is settled. Chapter 7 cases typically clear your debts, while Chapter 13 requires partial repayment. A bankruptcy judge will decide how much you need to repay based on laws in your state.

Debt settlement typically requires that you make a lump sum payment to clear your account. If you are unable to pay that amount right away (most people in default can’t), you’ll have to stop paying your credit card bills until you save enough to settle the debt. Stopping payment can further damage your credit and expose you to late fees, additional interest charges, collection efforts and lawsuits.

The possible advantage to settlement is that in exchange for a payment, creditors will sometimes agree not to report the settlement to the three major credit-rating bureaus. Your earlier credit problems probably have damaged you credit score, but if the settlement isn’t reported, it may take less time to rehabilitate your credit score.

Advantages to Chapter 7 bankruptcy:

Clears most debts and offers a financial fresh start.
Doesn’t require the filer to pay taxes on unpaid debts.
Prevents creditors from pursuing collections.

Disadvantages to Chapter 7 bankruptcy:

Damages credit report for 10 years.
Some states allow seizure and sale of you home and other properties. You should review what is exempt in your state.
Requires that you wait eight years before filing again under Chapter 7.

Advantages to Chapter 13 bankruptcy:

Protects your property, including your house and car, from foreclosure and repossession to cover debts.
After you complete required payments, you receive a discharge of debt.
You aren’t required to pay taxes on forgiven debt.
Waiting period before you can file again is two years – six years less than under Chapter 7

Disadvantages to Chapter 13 bankruptcy:

Requires that you follow a court-ordered payment plan that lasts three to five years.
Reduces your credit score for years, making it difficult to borrow money or obtain credit.

Other Considerations:

Learn how long bankruptcies stay on your credit report. Before any lender extends you a loan, they will pull your credit report. Accordingly, you want your credit report to look as good as possible. Unfortunately, your bankruptcies will stay on your reports for years.

A chapter 7 stays on your report for 10 years after you file. Your credit score can fall 150 points or more. The higher your score, the more it will fall.
A Chapter 13 stays on your report for seven years after you file. Your credit score will also be lowered.

Understand the effect of debt settlement on your credit report. Debt settlement negatively affects your credit report because you typically stop making payments to your creditors as you save up money to make a lump sum offer. (If you can save money while continuing to pay your monthly debts, then you probably don’t need to consider debt settlement or bankruptcy in the first place).

By missing payments, your creditors will probably report the debt as in default. If you wait long enough (such as 180 days), the debt gets charged off and sold to collections. This type of negative information will stay on your credit report for years. For example, a collections account can stay on your report for seven years.
However, creditors don’t have to report negative information to the credit bureaus. Instead, you might negotiate an agreement where they won’t report it.

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PPP is out of money, leaving many firms grasping for lifelines

April 16, 2020December 4, 2024 Martin

A new Lending program for Small business maxed out Thursday morning and Stopped accepting new application for loans. All banks participating in the SBA loan programs have effectively stopped loaning money. Any replenishment of these Funds seems unlikely to happen at the moment as Congress is bitterly divided how to move forward as the nation plunged into unemployment levels not seen since the great depression.

The Small Business Administration said on its website that the agency “is unable to accept new application … based on available appropriations funding”

This leaves many business who submitted an application and waiting on funds to evaporate right in front of them overnight – literately. The economy continues to crumble and lawmakers are scattered all over the country advancing conflicting proposals and bickering.

The government has not released data showing how much of that cash has been disbursed. It unclear how many firms have secured new loans however its estimated that only a small portion of firms have gotten any money from the program, though it appears to be just a fraction of the 30 million small businesses in the United States.

The SBA approved 1,661,397 loans from 4,975 lenders before it was exhausted. Due to bottleneck issues between the agency and banks, only a fraction of those have actually been credited to customers’ bank accounts.

This week, JPMorgan Chase said it has funded $9.3 billion of the loans so far and was still processing 300,000 applications seeking $36 billion. Bank of America says it has received applications seeking more than $40 billion in loans.

The Federal Reserve eased restrictions it had put on Wells Fargo’s growth after the San Francisco-based bank said it had received applications worth more than $10 billion in loans in just a few days.

The PPP program reached its funding limit while a separate program, called Economic Injury Disaster Loans, is also running short on funds. The funding shortfall has already caused that program to slash the size of loans it gives to small businesses, SBA officials say.

In a statement Wednesday, Mnuchin and SBA Administrator Jovita Carranza warned that a lapse in appropriations threatens to further disrupt the loan programs.

Small-business owners have few options now that the fund is dry. Many businesses whose applications were approved before the funding ran dry are in limbo, too. The SBA has not specified how much of the allocated $350 billion has actually been transferred to owners’ bank accounts, and many businesses haven’t seen their loans.

The White House administration has requested another $250 billion for the program, but a political clash between Democrats and Republicans has let the funding lapse. Democrats have insisted that part of the funding be walled off for lenders that service minority-owned businesses, and have push for another $250 billion for hard-hit hospitals on the frontlines of the pandemic, states and local governments suffering from revenue loss, and a 15 percent increase in food stamps.

In Summary

Because of the bitter divide, many firms are now considering bankruptcy protection as their next best option. The government relief seems tepid at best and protecting your your business, your home, and your family has never been more important. Contacting one of our top bankruptcy attorneys for a free consultation by phone to understand your options.

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Filing Bankruptcy in COVID – 19

April 16, 2020April 16, 2020 Martin

The last several weeks have brought limited relief to businesses grappling with an immediate economic downturn that is the result of COVID-19 and social distancing. However, some businesses will require more help than short-term loans backed by the government can provide. They will need to restructure mortgage loans, reduce debt service, or even eliminate unsecured debt.

During this crisis, there will be an unprecedented number of bankruptcies filed and many companies and individuals will find bankruptcy as their last lifeline. There are several different types of bankruptcy depending if you own a home, a small business, or struggling to just stay on top of your credit cards and rent.

cares act, chapter 11, chapter 7, chapter 13,

Businesses and individuals will be able to use powerful tools under the Bankruptcy code to clear up debts, and clean your balance sheet while also getting breathing room and preventing creditors coming in and taking over. Its more important then ever know and understand your rights as a consumer or business. There is extended protection under the CARES in conjunction with traditional bankruptcies filings.

There are 3 primary types of Bankruptcy filings which included Chapter 7, Chapter 11, and Chapter 13. Each one depends on if your a business, if you want to keep your doors open or forced to liquidate your assets. If your an individual looking for a lifeline a Chapter 7 can provide immediate relief. The CARES act chapter 11 subchapter V allows businesses with up to 7,500,000 dollars to now file for a 11 protecting their assets, which is available for only 1 year, at which time the amount will return back to 2 million and change.

COVID – 19 has made these times uncertain and its important to talk to the experts about what your options may be. Contacting us is hassle free and may be the best option you have to protect yourself.

In Summery

We are all heading into a period of significant economic disruption, likely for an extended period of time until we have reliable testing, strong therapeutics, and a vaccine for the novel coronavirus causing COVID-19. Contacting us will provide a free consultation and make you fully aware of your options. We can help position you so you don’t have to worry.

1,895% spike in Mortgage deferments amid confusion on paying it back

April 8, 2020April 8, 2020 Martin

Americans struggling to pay their mortgages because they’ve lost a job or income during the coronavirus pandemic can put off that bill for up to a year due to the CARES Act. But while the measures should be creating a feeling of relief, many borrowers have been left anxious because of confusing messages from the government and banks.

deferment, mortgage, home, rent, past due, CARES act, home loan,

Experts are concerned about how this will play out for borrowers over the coming months, even after the recently enacted relief package from Congress, called the CARES Act, which allows many people to delay their mortgage payments for up to a year.

“The problem with the CARES Act is that it doesn’t make clear how borrowers pay back the money during a forbearance period,” says Shamus Roller, executive director at National Housing Law Project, a nonprofit legal advocacy center.

“There’s a chance that something could go wrong in that process,” he says, “and it requires a lot of interacting with service centers that are overburdened with calls.”

Other concerns that are out there is that if borrowers continue to miss payment for half a year or longer then the FHFA will have to rescue Fannie, Freddie and lenders alike.

What are your options?

That depends on many factors and how long everything takes to get back to normally. Some areas of the economy will recover quickly, while other like airlines, hospitality, bars & restaurants, move theaters, and many others could take years to recover.

Enhanced unemployment insurance is available to most people out of work including self employed and independent contractors. However this is typically a small portion of what your annualized income is and could be challenging to maintain your head above water.

Bankruptcy could be a viable option to stopping foreclosures, repossession, and debt collectors.

In Summary

Be proactive and don’t just sit around waiting for the government to do something. Take an inventory of your assets, review your obligation, area of work and expertise, and then weigh your options. In some cases bankruptcy could be your best option, to get some immediate relief, which clan play a “stay” on everything all at once and allow time to start to reorganize.

Is the new SBRA chapter 11 right for your business?

April 8, 2020April 8, 2020 Martin

Congress just made it easier and less expensive for small businesses to reorganize under Chapter 11. Small businesses continue to struggle under the current social isolation measures in place in most states.

Even with the recent financial relief package passed by Congress, many small businesses will not have sufficient resources to meet their most basic obligations such as rent, utilities and other operational necessities.

In an effort to keep small business afloat during this crisis, Congress expanded small business bankruptcy relief in the Coronavirus Aid, Relief and Economic Security Act (CARES Act).

The CARES Act amends the Small Business Reorganization Act of 2019 (SBRA) by increasing the availability of Chapter 11 relief to a greater number of small businesses. Section 1113 of the CARES Act amends eligibility to qualify for filing as a small business debtor for a business which has debt up to $7.5 million.

The current debt limit to qualify as a small business filer under SBRA is $2,725,625. This increase in the debt threshold of $7.5 million will expire and return to $2,725,625 after one year.

SBRA has only been effective since February 19, 2020. Prior to the enactment of subchapter V, created by SBRA, many small businesses found traditional Chapter 11 proceedings difficult and expensive, and not a practical tool for reorganization. Often, small businesses would end up in liquidation. The goal of the SBRA is to make small business bankruptcies faster and less expensive.

Subchapter V was enacted to address some of these issues. Some of the key features of a Chapter 11, subchapter V case:

There is no creditors committee.
A case trustee is appointed. The private trustee monitors the debtor’s progress during the case in order to promote consensual plans of reorganization.
There is no requirement to file a disclosure statement. The plan of reorganization will include a brief history of the business, a liquidation analysis and financial projections.
A plan of reorganization must be filed within 90 days. All of the debtor’s disposable income must be put to plan payments to creditors, and the plan must be at least three years and cannot exceed five years.
Only the debtor can file a plan.
No United States Trustees fees.
Owners are able to retain their interests in the business.
If the debtor completes the payments required under a confirmed plan, it receives a discharge of the remaining debt.

These are material changes that will significantly impact the rights and procedures to which both debtors and creditors are accustomed in traditional Chapter 11s. And the applicability of the SBRA to potential traditional Chapter 11 filers is also significant. It has been estimated, based on recent Chapter 11 statistics, that up to half of Chapter 11 debtors will be eligible to file under the SBRA.

In Summary :

The SBRA Act endeavors to strike a balance between chapter 7 and chapter 11 bankruptcies for small-business debtors.
The act lowers costs and streamlines the plan confirmation process to better enable small businesses to survive bankruptcy and retain control of its operations.