shape
shape
shape
shape
shape
shape
8 September 2020 / Monette W. Cope

Waiting for the Bankruptcy Tsunami

Topics: Bankruptcy

There will be a coronavirus bankruptcy wave; the only question is when.  Without a working crystal ball, no one can answer that.  But, we can guess at what conditions may precipitate the wave.

Large businesses are filing bankruptcies at an alarming rate. Who would have predicted that Borden Dairy, Neiman Marcus, JC Penney, Hertz, or Whiting Petroleum would file even two years ago?  Small businesses have closed permanently as a direct result of the pandemic.  

The federal government will play a role in the wave of business bankruptcies.  It is still unclear whether Congress will extend another round of PPP loans to help businesses keep afloat.   Once these loans dry up and businesses are forced to lay off employees and/or close, the bankruptcy filings will start in earnest.  Some will try to restructure under chapter 11; small businesses can now take advantage of chapter 11’s Subchapter V, which recently came into effect and is tailored to accommodate small businesses.  Other small businesses will just dissolve and the individual business owners who guaranteed business loans will likely file under chapter 7.

The business bankruptcies will spawn individual bankruptcies.  Once the government payments to individuals dry up and unemployment benefits expire, individuals will start to file if they find themselves unemployed or employed at a lesser rate and unable to meet expenses.  These most likely will be chapter 7 filings, as they will not have the income to sustain a chapter 13 plan and payments.  Others will come out employed and able to propose a chapter 13 plan to cure arrears and keep their homes and vehicles.

Bankruptcy filings will be impacted by the financial industry as well.  Many lenders have been willing to forbear on loan payments, delay repossessions, or rewrite loans to accommodate changed financial circumstances due to the pandemic.  Once business returns to normal, and payments come due that can’t be met, this will have an impact on filings.  

Landlords will have a hand in increasing bankruptcies.  If they are currently working with tenants and reducing rent by agreement, both to businesses and individual households, they will stop at some point, and the businesses and individuals affected could be driven to bankruptcy with debt from unpaid rent contributing to a difficult financial situation.

While all of this is predictable and unfortunate, and indeed coming, the many factors involved make predicting when the wave will happen a difficult task.  But, it will happen. 

This blog is not a solicitation for business and it is not intended to constitute legal advice on specific matters, create an attorney-client relationship or be legally binding in any way.

Related News

Alerts / 12 April 2021

Landlord Considerations Regarding Lease Provisions

Lease terms are often subject to interpretation against the party drafting them. Given this, it is imperative that landlords are cautious in lease provisions to guard against defenses raised by tenants when obligations are not met.
Read More
Alerts / 8 April 2021

COVID-19 Bankruptcy Relief Extension Act Extends CARES Act Provisions

President Biden signed the COVID-19 Bankruptcy Relief Extension Act into law on March 27, 2021, previously passed overwhelmingly by Congress. The Act extends provisions of the Coronavirus Economic Stabilization Act of 2020 (CARES Act) through March 27, 2022.
Read More
Insights / 7 April 2021

A Look Back Analyzing 2020 Consumer Complaints and Litigation Statistics

As we enter the second quarter of 2021, let us look back at some of the consumer litigation trends of this past year and begin to analyze some of the data. These trends continue to affirm some long-standing trends found in cases involving the consumer litigation filings for the FDCPA, TCPA, and FCRA.
Read More

Join Our Email List

Get the latest articles and news delivered to your email inbox! 
Subscribe

Contact the Author

Monette W. Cope

Attorney
Contact

Join Our Email List