Blogs

Many clients have contacted Shenwick & Associates asking whether it is safe to ship goods to Saks following its Chapter 11 bankruptcy filing.The real concern is whether vendors will be paid for goods shipped after the bankruptcy filing.In most Chapter 11 cases, the answer is yes—shipping goods post-petition is generally safe, particularly where the debtor has obtained Debtor-in-Possession (DIP) financing.Here are the key considerations:Post-petition shipments receive priority payment status. Vendors who supply goods after the bankruptcy filing typically hold administrative expense claims under Bankruptcy Code §503(b)(1)(A). These claims must generally be paid in full as a condition to confirming a Chapter 11 plan under §1129(a)(9), giving them priority over pre-petition unsecured claims.DIP financing supports ongoing operations. DIP financing provides liquidity so the debtor can continue operations and pay ordinary-course expenses, including post-petition vendor invoices. Courts often authorize payment of undisputed post-petition invoices in the ordinary course.Chapter 11 encourages vendors to continue shipping. The purpose of Chapter 11 is to allow a debtor to reorganize while continuing business operations. The Bankruptcy Code structure incentivizes vendors to continue supplying goods so the business can survive.Continuing shipments may preserve business relationships. Vendors who continue supplying merchandise maintain relationships with buyers and may offset losses from pre-petition shipments through continued profitable sales. Vendors who refuse to ship risk losing shelf space to competitors.Vendors are not required to ship post-petition. The Bankruptcy Code does not obligate vendors to continue selling goods after the filing; the decision remains a business judgment.Payment is not absolutely guaranteed. While administrative claims are entitled to priority, risk remains if the case later converts to liquidation and administrative expenses exceed available assets.Critical Vendor or “Doctrine of Necessity” relief may be available. Vendors supplying unique or essential goods may seek treatment as a Critical Vendor, allowing payment of certain pre-petition amounts if the court finds such payments necessary to preserve operations. While beneficial, this status is not required for vendors to safely ship post-petition goods.In most circumstances, vendors can safely continue shipping goods to a Chapter 11 debtor like Saks, especially where DIP financing is in place.Vendors or advisors with questions regarding shipping goods or protecting claims in the Saks bankruptcy are welcome to contact us.
Jim Shenwick, EsqShenwick & Associates917-363-3391[email protected]Please click the link to schedule a telephone call with me.https://calendly.com/james-shenwick/15Please click the link to schedule a telephone call with me. https://calendly.com/james-shenwick/15min

There is an alarming decrease in the number of attorneys representing debtors these days.  No new attorneys are entering the field. Attorneys in the prime of their career are exiting the field.  The attorneys remaining are quite older and they are scaling back their practice.  In the next 5 years several senior attorneys will fully retire.What is more, the attorneys still actively practicing are not hiring. No one is hiring junior associates. No one is building.This trend is not limited to consumer bankruptcy cases. Chapter 11 and 12 attorneys have also left the field. At a time when business and farm bankruptcies are rising, there is a lack of attorneys willing to take on these cases.The trend in consumer cases is for attorneys to work from home without supporting staff. Where are all the bankruptcy attorneys? Why are attorneys leaving the field in the prime of their career? Why is no one hiring? Something is wrong, but what is it?Three technology factors account for some of the decline in hiring:

• Remote 341 Hearings: Established bankruptcy firms hired associates to represent clients before the bankruptcy trustee, but those hearings transitioned to telephonic and later Zoom video hearings during Covid. It is no longer necessary to hire associate to cover hearings spread out in Omaha, Lincoln, Grand Island, North Platte and Scottsbluff, Nebraska.  In-person trustee meetings are a thing of the past.
• Digital Signatures: New court rules allowing clients to sign documents with digital signatures.  Clients no longer meet personally with an attorney to sign documents.
• Digital Documents:  Instead of dropping off a pile of bills, paystubs, bank statement, tax returns and other documents required to prepare a bankruptcy petition, most clients upload documents digitally.  Although some clients still hand over paper documents, most do not.  There is no need to meet with clients to receive paper documents.

These changes account for some of the reduction in bankruptcy attorneys and for the trend towards working from home without staff. But this does not explain why attorneys are exiting the field in the prime of their career. Shouldn’t the ability to represent clients remotely throughout the entire state without the need to travel to distant court hearings actually encourage entrepreneurial attorneys to expand their practice by hiring new associates? Shouldn’t cost reductions in gathering and signing documents cause firms to expand?  Something is wrong here.Lack of Compensation:The number one cause of a decline in the debtor’s bar is the lack of compensation.  Firms are not hiring new attorneys because they are not confident they can afford the salaries. Chapter 13 attorneys have seen a decrease of their income drop by nearly 20% over the past five years due to inflation.  The court’s response?  Apparently a 6% fee increase is arriving soon and Nebraska fees are in line with other courts in the 8th Circuit, but nevertheless a permanent pay cut has been levied. Chapter 13 attorneys are paid flat fee set by the court (currently $4,700) and attorneys lack the ability to charge hourly.  Attorneys are leaving the field to practice in other areas of law where they can get paid for their time.Chapter 7 attorneys charge a flat fee that is reviewed by the US Trustee’s office. Attorneys cannot collect fees after a case is filed (since their debt is discharged along with all other debts), and debtors cannot finance their case with personal loans.No Fee Splitting: Debtor attorneys may not share compensation or split fees with other attorneys without court approval, although creditor attorneys can and do split fees routinely. It is difficult to “team up” with other attorneys for this reason.Increase in Bureaucratic Complexity:  Our bankruptcy process becomes more complicated by the day. New rules and forms pop up every year. I recently handled a probate case and I was amazed that the procedures and forms were the same as 30 years ago. Everything was exactly the same.  Not so with bankruptcy practice.Bankruptcy Reform Act of 2005:  Congress made radical changes to the bankruptcy law in 2005 with the specific purpose of making the process expensive and difficult. They succeeded.  At first we did not notice the impact since the Great Recession of 2008 swelled the bankruptcy filings, but 20 years later the result is clear.  The incredible burden of gathering so much information has made the process miserable and tedious. Where do we go from here?Without reform this trend will continue. Attorneys will continue to leave the field and debtors will struggle to find competent representation. Farm clients are being turned away routinely. Business clients have few attorneys to pick from. Consumer attorneys are declining to represent difficult clients knowing they can never recoup the time expended in handling their cases.Suggestions:

• Review compensation rules to ensure attorneys receive fair compensation in comparison to other fields of law. Index fees to inflation.
• Cut down on burdensome procedural changes.
• Engage debtor attorneys in regular and informal settings to get real feedback.
• Sponsor “nuts and bolts” seminars to teach young attorneys how to practice.
• Fix the chapter 13 confirmation process. The stipulated confirmation order process is a failure. The Chapter 13 trustee attorneys are unwilling to resolve simple objections with a stipulation. 
• Promote uniformity in the Chapter 7 process.  Every trustee uses a different system to gather documents and has different practice rules. 
• Encourage attorneys to take on chapter 11 and 12 cases. Attorneys must feel confident they will be paid for taking on these complex matters. More educational and procedural information is needed. Sample plans, forms, and examples are needed to instruct new attorneys.
• Community Building.  Nobody likes working alone. Attorneys need a place to routinely visit with other local attorneys to improve their skills. Informal workshops that give CLE credit would be attractive.

Nebraskans need competent professionals to help them through hard times.

At Shenwick and Associates, we regularly represent
individuals and businesses facing financial distress, including borrowers who
have defaulted on Small Business Administration (SBA) loans. Over the past
several months, we have observed a marked increase in aggressive collection
activity by the SBA and the U.S. Department of the Treasury against
borrowers and guarantors of defaulted SBA loans.

Heightened Enforcement Activity in Late 2025 and 2026

Beginning in the last quarter of 2025 and continuing into
2026, collection efforts by the SBA and the Treasury have intensified.
These efforts are not limited to letters or informal demands. Instead, we are
seeing the government use a broad range of statutory collection tools,
including:

• Retention
  of private collection agencies to pursue defaulted SBA loans;
• Administrative
  wage garnishment of up to 15% of a debtor’s wages, without the
  need for a court judgment;
• Seizure
  of federal tax refunds through the Treasury Offset Program; and
• Offset
  of Social Security benefits, with up to 15% of monthly payments
  taken from individuals who are personally liable for, or who guaranteed,
  SBA loans.
•  

These collection actions are being taken against both
primary obligors and personal guarantors of SBA loans. If you signed a
personal guarantee, your personal income and federal benefits may be at risk.

The “They Won’t Collect” Myth

We recently met with a new client who told us that their
accountant had advised them: “Don’t worry about a defaulted SBA loan—the SBA
isn’t really collecting on those loans.” Unfortunately, that advice is simply
wrong!

Based on our recent experience and the increasing number of
calls we are receiving, it is clear that the SBA and Treasury authorities are
actively pursuing collection of defaulted SBA loans. Assuming that the
government will not act is a mistaken and risky strategy that can result
in wage garnishments, lost tax refunds, and reduced Social Security income.

Take Action Early

If you have defaulted on an SBA loan, or if you personally
guaranteed an SBA loan that is now in default, it is critical to take
proactive steps. Options may exist to address the debt, such as a mitigate
collection efforts, or restructure or resolve the obligation, or a bankruptcy
filing and or a payment plan with Treasry—but those options are often
time-sensitive.

Consulting with an experienced bankruptcy and workout
professional can make a meaningful difference in protecting your income,
your retirement income and your financial future.

If you are facing collection activity related to a defaulted
SBA loan, we encourage you to seek qualified legal advice sooner rather than
later. For those clients or their advisors who have questions with respect to defaulted
SBA loans, please contact Jim Shenwick, Esq.

Jim Shenwick, Esq 

917 363 3391 

[email protected]

Please click the link to schedule a telephone call with me.

 https://calendly.com/james-shenwick/15min

We help individuals & businesses with too much debt!

 
Why is it Too Late for Asset Protection Planning after a Claim or Litigation Arises?Jay Adkisson has written a very informative article about why it is difficult to do Asset Protection Planning after a claim or lawsuit arises. The article was published in Forbes. At Shenwick & Associates we get many telephone calls and emails from clients about Asset Protection Planning and we summarize that article below.   Clients
often ask whether they can protect their assets after a lawsuit threat appears
on the horizon. Mr.  Adkisson explains in his article, that once a
claim exists, meaningful asset protection planning is unavailable. Under the Uniform Voidable Transactions Act (and its predecessor,
the Uniform Fraudulent Transfers Act), a “claim” arises the moment the
underlying event giving rise to liability occurs—not when a demand letter
arrives, not when a complaint is filed, and not when a judgment is entered. Any transfers made
after that point are vulnerable to attack as voidable transactions.

Many
debtors mistakenly believe they are safe if payments are current or no lawsuit
has been threatened, but the law provides no such protection. Mr. Adkisson states that post-claim
transfers often trigger serious consequences far beyond simply unwinding the
transaction. -Creditors can sue the transferee—often a spouse, child, or
friend—and obtain a judgment for the value of the transferred asset. -Courts may
award attorney’s fees, civil conspiracy damages, or even punitive or trebled
damages if the transfer was intended to evade creditors. In bankruptcy, these
transfers can result in denial of discharge under § 727, converting what might
have been a dischargeable debt into a permanent financial burden.

 Asset
protection planning must occur before any claim exists. However, if a claim exists or litigation has been commenced clients are still allowed to utilize Federal & State Exemption statutes.Clients or their advisors with questions about Asset Protection Planning should contact Jim Shenwick, Esq. 917 363 3391  [email protected]Jim Shenwick, Esq  917 363 3391  [email protected] Please click the link to schedule a telephone call with me. https://calendly.com/james-shenwick/15minWe help individuals & businesses with too much debt!