Price to File Bankruptcy to Increase in November

Posted by Ryan Blay on September 20th, 2011 in Bankruptcy, Bankruptcy Legislation, Bankruptcy procedures, Business Bankruptcy, Chapter 11, Chapter 13, Chapter 7, Illinois, Wisconsin

     Who is the Judicial Conference of the United States? It is a group of judges and other policy members who help shape how the courts run in our country. You may not have been aware of the Conference until today, but one of its recent decisions will affect thousands of bankruptcy filers each year.
     Right now, the filing fee owed to the courts for filing a Chapter 7 bankruptcy petition is $299. The Chapter 13 filing fee is $274. There are also fees for certain actions taken during a bankruptcy – scheduling additional creditors ($26); filing an adversary proceeding ($250); filing an appeal ($250); and a creditor filing a Motion for Relief from the Automatic Stay ($150).
     As of November 1, these fees are all set to rise. Chapter 7 and Chapter 13 fees will go up by $6, and the other actions will increase as well. These fees will allow the courts to balance their own budgets and handle the large number of bankruptcy cases filed each year.
     With the costs of bankruptcy set to rise, now is a good time for both bankruptcy filers and for creditors to discuss how these news laws will affect them. For more information on bankruptcy and its filing fees, call Lakelaw at 1-800-LAKELAW or (262) 694-7300 in Wisconsin.

What are the Benefits of a Single Asset Real Estate case? (Third in a Series of Three)

Posted by Jonathan Brand on March 22nd, 2010 in Business Bankruptcy, Chapter 11, Illinois, Real Estate, Uncategorized, Wisconsin

Now that we have explored the characteristics of a Single Asset Real Estate debtor in bankruptcy (see the First and Second blawgs in this series), it is time to look at the advantages of filing a chapter 11 case for a Single Asset Real Estate debtor.  

One significant benefit of a Single Asset Real Estate entity filing chapter 11 is the automatic stay.  The Bankruptcy Code provides that all foreclosure and collection activity must stop when a debtor files bankruptcy. If your company  is facing an imminent Motion to Appoint a Receiver or a Foreclosure Sale in a state court case, filing chapter 11 will temporarily stop the state court action from moving forward. 

The automatic stay will also provide the Single Asset Real Estate debtor some flexibility to develop cash if the property has tenants and is producing cash flow or rental income.  If there is sufficient cash flow, a Single Asset Real Estate Debtor will be more likely to develop cash when the value of the loan is worth less than the value of the property.    

While the automatic stay is beneficial for many debtors, the automatic stay has a limited shelf-life in a Single Asset Real Estate case. The automatic stay is limited to a 90-day period in Single Asset Real Estate case.  At the conclusion of the 90-day period, the Single Asset Real Estate debtor must propose a plan of reorganization or begin to tender monthly payments due to the lender(s) of the debtor. 

Lakelaw understands how to plan so this deadline can work in favor your chapter 11 case.  The key to success is pre-bankruptcy planning.  Through planning prior to filing for bankruptcy, Lakelaw can prepare for the difficulties presented by the limited application of the automatic stay.

Despite the abbreviated period for the application of the automatic stay, a Single Asset Real Estate case still has  benefits. Generally, with proper planning, a Single Asset Real Estate debtor may be able to successfully cram down a lender.  A cram down, under the Bankruptcy Code, allows a debtor to modify the monthly payments (and the amount of principal) due to a lender under  loan.  If a Single Asset Real Estate debtor can propose a feasible chapter 11 plan of reorganization, then it is more than likely that the entity can:

• Reduce the monthly payments which may have caused the entity problems prior to filing bankruptcy; and
• Allow the debtor (or its investors) to enjoy any appreciation in the value of the property after the chapter 11 plan is confirmed.

To be clear, while there are some risk in filing a Single Asset Real Estate case; with the right counsel, strategy and planning, there are many rewards which may be realized by an entity (or its investors).  

Lakelaw appreciates and understands the complexities of the Bankruptcy process.  We can help you or your company successfully maneuver through the bankruptcy process.  With over 35 years of experience in evaluating Single Asset Real Estate cases, Lakelaw can identify what is the best option for your company.  Lakelaw serves clients with financial restructuring needs throughout Illinois and Wisconsin.

What are the Characteristics of a Single Asset Real Estate case? (Second in a Series of Three)

Posted by Jonathan Brand on March 3rd, 2010 in Business Bankruptcy, Chapter 11, Real Estate

A Single Asset Real Estate case usually involves a commercial building, apartment complex, or even vacant land.  Generally, a Single Asset Real Estate case concerns a piece of property, or a project, owned by an an entity (a limited partnership, or more commonly now, a limited liability company).  The entity’s sole purpose is to operate the property with funds generated by the property.  

The most important creditor in a Single Asset Real Estate case is the entity’s mortgage lender.  In some deals, the entity has secured financing from second-tier or mezzanine lenders.  The Singe Asset Real Estate entity may also owe debts for taxes, utilities, or property management fees. 

Under the Bankruptcy Code, a Single Asset Real Estate case has the following three characteristics:

• a single piece of real property or project (excluding residential property with less than four units);
• which generates substantially all of the income for the debtor (who is not a family farmer); and
• the company (or debtor) operates no substantial business other than operating the property or project.

A Single Asset Real Estate case is not limited to small projects.  It can include large commercial properties.  Even a large shopping center worth millions of dollars could be Single Asset Real Estate case.  If you are the member or owner of a Single Asset Real Estate entity, there are benefits to filing a chapter 11 case.  However, you have a more difficult road than a typical debtor in chapter 11.  Our third and final blog in this series will explore the benefits and difficulties associated with a Single Asset Real Estate case.  

We at Lakelaw know the details of Chapter 11.  David Leibowitz taught the course on Real Estate Bankruptcy Law to graduate law students at John Marshall Law School.  He was recommended for the job by former Bankruptcy Judge Ronald Barliant as a result of his work before the Bankruptcy Court.  Jonathan Brand has had exposure to real estate cases not only at Lakelaw, but also during his tenure as a law clerk with two different bankruptcy courts. Lakelaw is available to answer any of your concerns related to Single Asset Real Estate cases or your other bankruptcy needs.

What is a Single Asset Real Estate Case? (First in a Series of Three)

Posted by Jonathan Brand on February 19th, 2010 in Bankruptcy, Business Bankruptcy, Chapter 11

Clients ask, what is a Single Asset Real Estate bankruptcy case?  If you or your company owns a single building or piece of land, cannot pay the lender and decide to file bankruptcy, then you probably have a “Single Asset Real Estate” case.  Special rules apply if you are thinking about filing bankruptcy under Chapter 11.  Lakelaw knows the rules related to Single Asset Real Estate cases and regularly represents people and businesses facing this situation.

A Single Asset Real Estate case can work for a property owner even in these troubled times.  But you have to understand the rules, parameters and guidelines if you want a Single Asset Real Estate case to work for you.  Chapter 11 can help you save your property.  However, Congress amended the Bankruptcy Code to make it easier for banks to foreclose on your property.  They convinced Congress that a company held just to own one parcel of real estate had no real reason to survive.  Congress bought this argument – hook, line and sinker.  So, Single Asset Real Estate cases are challenging, but not necessarily dead on arrival.

We at Lakelaw know the details of Chapter 11.  David Leibowitz taught the course on Real Estate Bankruptcy Law to graduate law students at John Marshall Law School.  He was recommended for the job by former Bankruptcy Judge Ronald Barliant as a result of his work before the Bankruptcy Court.  Jonathan Brand has had exposure to real estate cases not only at Lakelaw, but also during his tenure as a law clerk with two different bankruptcy courts.

There are many ways that a Single Asset Real Estate case can fail.  But if you know the rules of the road, you can take advantage of the benefits associated with filing a Single Asset Real Estate case and have your best chance of success.  Let Lakelaw navigate your Single Asset Real Estate case to a road towards recovery.

I gave my bank a financial statement – is this a problem? Your debt may be non-dischargeable.

Posted by David Leibowitz on June 3rd, 2009 in Bankruptcy Crimes, Bankruptcy Legislation, Business Bankruptcy, Discharge, dischargeability of debt, financial statements

My bank took all the money in my account! Can they do that? Chapter 11 can help.

Posted by David Leibowitz on April 29th, 2009 in Bankruptcy, Business Bankruptcy, Chapter 11, Bankruptcy, Chapter 11, setoff, uniform commercial code

My client called and was frantic.  ”The bank took all the money from my account – I can’t make payroll and my checks are bouncing.  Can they do that?

This is called “set-off”.  And yes, the bank can do that.  

Here’s the idea.  If you have money in the bank, it is money that the bank owes you.  But suppose you also owe money to the same bank.  This typically happens to businesses which have loans with a bank and naturally maintain their checking account with the bank.  So the debt you owe the bank – say a business loan – may be offset by a debt that the bank owes you – your money in the bank.

If you are in default with your bank under your loan agreement, even if you simply haven’t abided by various covenants or agreements in your loan agreement with the bank, the bank has the right to enforce its agreement with you.

For example, the bank has the right to set off the money in your checking account against the debt you owe the bank.  This can be mighty inconvenient.  Your employees won’t get paid and your checks will bounce.  The bank also would have the right to enforce its security agreements with you – for example collect accounts receivable directly from your customers or even sell your assets at auction.

Chapter 11 of the bankruptcy code is your strongest response to these actions.

You’ll need a plan.  You’ll need financing to operate while you are in reorganization.  And you’ll need good legal counsel – like Lakelaw – to represent you in your chapter 11 case.

If your business can recover, you owe it to yourself to try.  Otherwise, your business and life work will face liquidation and a rapid demise.

My business is bankrupt. Do I need to file a personal bankruptcy?

Posted by David Leibowitz on March 29th, 2009 in Bankruptcy, Business Bankruptcy, Chapter 7

Many small businesses face bankruptcy today.  Banks have cut off credit.  Sales have declined dramatically.  So many small businesses are closing.  People frequently ask me: “Do I have to file a personal bankruptcy if my business is bankrupt?”  All too frequently, the answer is yes.

In most cases, business debt to a bank is supported by the owner’s personal guaranty to the bank.  This means that the owner will personally be responsible to the bank for any shortfall on liquidation of the bankrupt corporation or bankrupt limited liability company.  In addition, business credit cards are almost always the personal liability of the individual shareholder of a corporation or member of a limited liability company.  Frequently, credit card debt of a corporation is significant.

In addition, key suppliers may have required personal guarantees of the owner as  a condition to extending credit to a new business.  So if the business fails, the owner may be left holding the bag as well.  The Small Business Administration often requires corporate borrowers to give a junior mortgage to their homes in order to secure a new loan. 

Finally, creditors may sue the owner of a corporation even if there is no legal basis.  They hope there will be no defense and that you will just consent to entry of a judgment against you.  So when your corporation or limited liability company fails and faces bankruptcy, be sure to get independent advice as to your own financial situation.  One saving grace – if your business fails and you are facing bankruptcy as a result, you may not have to worry about the “means test” and chapter 13 if your debt is “predominantly” business debt.  In such cases, the means test does not apply and you are eligible for relief under chapter 7.

Should I file Chapter 11 for my business?

Posted by David Leibowitz on March 28th, 2009 in Alternatives to Bankruptcy, Business Bankruptcy, Alternatives to Bankruptcy, Assignment for the Benefit of Creditors, Chapter 128, Dissolution, Uniform Commercial Code Sale

Chapter 11 is used to help businesses reorganize.  It continues to be an important tool.  There are many important options which a small business and even a medium sized business should consider when facing financial difficulties.

Is the business fundamentally sound?

If the business continues to be viable, think about what went wrong.  Think about how it could be fixed.  Think what the business would look like if you fixed it.  Then think about whether your creditors are better off if your business is fixed and continues to be viable.  If you can think positively about all of these questions, and if you have some cash to fund the reorganization of your business, Chapter 11 can still be a good idea.  There are some down-sides to chapter 11:

• It costs a lot
• There is court supervision
• You have to pay for the expenses of administering the case – even the costs of people who may oppose your efforts.

Alternatives to Chapter 11

There are several alternatives to chapter 11.  Lakelaw handles all of these for small and medium sized corporations, limited liability companies and other business forms:

• Assignment for the benefit of creditors – followed by restructuring under a different management
• Informal composition with creditors
• Chapter 128 Receivership in Wisconsin

Liquidation of the Business

In the event that you feel that your business can’t be saved, there are many possibilities.  Bankruptcy under chapter 7 is only one possibility.  Here are some others:

• Liquidation under chapter 7
• Dissolution and liquidation under state corporate law
• Informal liquidation without dissolution under state corporate law
• Sale of all assets by secured creditor under the Uniform Commercial Code

Each of these vehicles has upside and downside.  So when in doubt, call us and we’ll evaluate your particular situation and then help you make the right choice for you and your business.

Help! My Employer Filed Bankruptcy

Posted by David Leibowitz on February 1st, 2009 in Business Bankruptcy, Chapter 11, employee rights in bankruptcy

When an employer files bankruptcy, it is vital that employees take steps to protect themselves.  Illinois and Wisconsin companies have been filing for bankruptcy.  Here are some of the biggest lately:

• Tribune Company
• Hart Schaffner & Marx
• Kimball Hill Homes
• Wisconsin Steel Industries
• Circuit City

It’s certain that more will file.

What do you do as an employee to protect yourself?  Here are some important steps to take:

• Verify your rights under the Summary Plan Description of your pension or profit sharing plan
• Confirm that the company is continuing to administer your benefit plan while in bankruptcy
• If your company has filed for bankruptcy under chapter 7, get in touch with the chapter 7 trustee and be sure that the trustee is taking over the plan as required by law
• File a proof of claim to be sure you get the priority wage claim to which you are entitled
• If your plant has closed without the benefits of the WARN Act, file a claim in the bankruptcy case and contact the Department of Labor.

The US Department of Labor has published a fact sheet for employees whose companies have gone into bankruptcy.

Lakelaw helps employees in Illinois and Wisconsin whose employees have gone into bankruptcy.   If your company filed a bankruptcy case somewhere other than Illinois, you can find attorneys in that area at Bankruptcy Law Network.