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This post appeared in the New York Times on 7/17/20

https://www.nytimes.com/2020/07/17/business/dealbook/bankruptcy-filings-...

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The Eye of the Bankruptcy Storm

Chesapeake Energy was among the companies to file for bankruptcy protection in recent weeks.Credit...Brett Carlsen/Reuters
July 17, 2020Updated 7:28 a.m. ET

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The pendulum swings back toward fear

As the pandemic persists, more and more companies have filed for bankruptcy protection, following in the footsteps of Hertz, J. Crew and Neiman Marcus. But financial restructuring advisers — the bankers and lawyers who help troubled companies repair their balance sheets or slog through Chapter 11 — say that they expect filings to accelerate. If anything, we’re now in the lull before the storm.

About 3,600 companies filed for Chapter 11 in the first half of 2020, more than any year since 2012, according to the American Bankruptcy Institute. The past few weeks have brought filings by the fracking pioneer Chesapeake Energy, the Japanese home goods company Muji USA and the retailer New York & Company.

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But cases dropped last month. Why? Advisers cited the federal government’s programs for stabilizing the economy and credit markets, as well as efforts by companies to bolster their cash by drawing down their credit lines and issuing new bonds. (Businesses worldwide have sold $2.1 trillion worth of bonds so far this year, up 50 percent from the year before.) Earlier-than-expected reopenings have bolstered some businesses’ performance, allowing them to bring in some sales — critical to servicing their debts.

Yet as coronavirus cases surge again, an uptick in filings may follow. The rise in infections brings the prospect of renewed lockdowns and shakes consumer confidence, testing companies’ abilities to survive another spell of little to no revenue. “We’re starting to see the pendulum swing back toward fear again,” William Hardie, a managing director in Houlihan Lokey’s financial restructuring group, told DealBook’s Michael de la Merced.

And what comes next could be ugly. Many companies that saved themselves by borrowing more money are now in a bind: They have mortgaged nearly all their available assets, leaving little wiggle room.

• Creditors are willing to give companies concessions on existing debt covenants — especially since they don’t want to recognize any of their loans as impaired, hurting their own balance sheets — but if borrowers need more money, they may find lenders are unwilling or unable to front the cash.

Where to expect the next wave: While retailers and energy companies have dominated the first wave, restructuring experts say the next round of filings could hit the travel industry hard, including airlines, hotels and firms that lease planes to carriers.

More companies will be taken over by lenders, who will convert their loans into equity. So far, advisers say, talks between debtors and creditors have been sanguine, with relatively few of the disagreements that often complicate Chapter 11 cases. “There’s no finger-pointing,” Mr. Hardie said. “Everyone realizes this is no one’s fault.”

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The C.D.C. has extended a ban on cruise ships until Sept. 30.Credit...Alexandre Meneghini/Reuters

Bankruptcy exemptions help debtors keep some of their property from being seized by the court. In Texas, you may file for exemptions in your homestead, personal property, personal accounts, or vehicles. If you are married, additional exemptions apply. 
In bankruptcy filings, all non exempt assets are placed in a bankruptcy estate and managed by the court’s appointed trustee. Bankruptcy exemptions allow filers to keep a portion of their properties without having to think about paying off debts owed to lenders. Knowing which properties fall under bankruptcy protection depends on the filing chapter of the bankruptcy petition and the state where you filed your case.
You need to review state bankruptcy laws and check whether federal bankruptcy exemptions apply before filing bankruptcy. What is unique in Texas is that a filer may choose to apply either state or federal exemptions when they file for bankruptcy. 
In Texas, you may file for exemptions in your homestead, personal property, personal accounts, or vehicles. In addition, for married couples, each may claim exemption for properties jointly owned, allowing them to double the exemption limit. 
Conditions for Homestead Exemption
Under Texas exemption laws, an individual’s residence may be excluded from the bankruptcy estate if it is less than 10 acres and is situated in a city, town, or village, or if the total property area is less than 100 acres in the country. Under the same laws, families may apply for double the area limit, with homes measuring 200 acres or less being exempted.
A debtor may also choose to sell the home and liquidate his asset. In such a case, under the Texas Property Code, the exemption still applies within the first six months after it was sold. 
Bankruptcy Exemptions for Motor Vehicles
Texas bankruptcy laws allow a filer to have the full value of a motor vehicle exempted from bankruptcy. Moreover, for individuals or families owning more than one vehicle, every licensed family member is entitled to have one vehicle listed for exemption. 
If you have a family member owning a vehicle but has no license, you may still file for exemption as long as the vehicle is operated by a licensed third party.. 
Exempted Personal Properties for Individuals and Families
All assets and properties other than your real estate are considered part of your personal property. 
Individuals without a family may have their personal properties exempted from the bankruptcy estate if the total asset value does not exceed $50,000. In contrast, for families, the head may file for a higher exemption limit of not more than $100,000.
Examples of personal properties which you may be filed for exemption are the following: pets, farm animals and livestock, clothing, food, home furnishings, household goods, family heirlooms, jewelries (as long as these does not make up more than 25% of exemptions), athletic or sport equipment, bicycles, firearms (not more than two), heath aids, religious books such as Bibles, and even burial plots.
A bankruptcy trustee can help you determine the value of your personal properties and help decide which can be filed for exemption.
Pensions, Retirement, and Health Savings Account Exemptions
Borrowers may also request to have their pensions and retirement accounts protected from creditors under the state bankruptcy law. Under the Texas Insurance Code, exempted accounts include the following: 

• Retirement funds or accounts enjoying special tax exemptions under the U.S. Tax Code
• Retirement and pension benefits for district and county employees, municipal and state employees, elected officials, teachers, firefighters, police officers, and judges
• Survivors benefits for firefighters, law enforcement officers, and emergency medical employees
• Tax-deferred retirement benefits
• Life, health, accident, or annuity benefits
• Uniform group benefit insurance for Texas employees
• Group insurance for Texas public school employees 
• Texas state college or university employee benefits. 

Non Exempt Debts
Although claiming exemptions can ease your hardship and help manage your remaining finances, take note that under the Bankruptcy Code, student loans, child support owed, or unpaid alimony will not be discharged by the bankruptcy court. You still have to pay back your debt to the creditor.
Aside from going through the non-exhaustive list of exemptions above, determining which properties are exempted and which are non-exempt under Texas laws may be done by bankruptcy trustees who are appointed by the country to oversee estates. It may also be done by bankruptcy attorneys hired to litigate a case. Your lawyer will also explain to you all applicable Texas laws and provide you with much needed credit counseling.
If you need help understanding exemptions and bankruptcy filing, you may consult with a Texas bankruptcy attorney Allmand Law Firm, PLLC. Our lawyers are experienced to provide legal counsel in bankruptcy cases and will help protect your assets by maximizing the exemption laws.
Contact our law firm here and schedule your free initial consultation.
The post Bankruptcy Exemptions in Texas appeared first on Allmand Law Firm, PLLC.

Bankruptcy exemptions help debtors keep some of their property from being seized by the court. In Texas, you may file for exemptions in your homestead, personal property, personal accounts, or vehicles. If you are married, additional exemptions apply. 
In bankruptcy filings, all non exempt assets are placed in a bankruptcy estate and managed by the court’s appointed trustee. Bankruptcy exemptions allow filers to keep a portion of their properties without having to think about paying off debts owed to lenders. Knowing which properties fall under bankruptcy protection depends on the filing chapter of the bankruptcy petition and the state where you filed your case.
You need to review state bankruptcy laws and check whether federal bankruptcy exemptions apply before filing bankruptcy. What is unique in Texas is that a filer may choose to apply either state or federal exemptions when they file for bankruptcy. 
In Texas, you may file for exemptions in your homestead, personal property, personal accounts, or vehicles. In addition, for married couples, each may claim exemption for properties jointly owned, allowing them to double the exemption limit. 
Conditions for Homestead Exemption
Under Texas exemption laws, an individual’s residence may be excluded from the bankruptcy estate if it is less than 10 acres and is situated in a city, town, or village, or if the total property area is less than 100 acres in the country. Under the same laws, families may apply for double the area limit, with homes measuring 200 acres or less being exempted.
A debtor may also choose to sell the home and liquidate his asset. In such a case, under the Texas Property Code, the exemption still applies within the first six months after it was sold. 
Bankruptcy Exemptions for Motor Vehicles
Texas bankruptcy laws allow a filer to have the full value of a motor vehicle exempted from bankruptcy. Moreover, for individuals or families owning more than one vehicle, every licensed family member is entitled to have one vehicle listed for exemption. 
If you have a family member owning a vehicle but has no license, you may still file for exemption as long as the vehicle is operated by a licensed third party.. 
Exempted Personal Properties for Individuals and Families
All assets and properties other than your real estate are considered part of your personal property. 
Individuals without a family may have their personal properties exempted from the bankruptcy estate if the total asset value does not exceed $50,000. In contrast, for families, the head may file for a higher exemption limit of not more than $100,000.
Examples of personal properties which you may be filed for exemption are the following: pets, farm animals and livestock, clothing, food, home furnishings, household goods, family heirlooms, jewelries (as long as these does not make up more than 25% of exemptions), athletic or sport equipment, bicycles, firearms (not more than two), heath aids, religious books such as Bibles, and even burial plots.
A bankruptcy trustee can help you determine the value of your personal properties and help decide which can be filed for exemption.
Pensions, Retirement, and Health Savings Account Exemptions
Borrowers may also request to have their pensions and retirement accounts protected from creditors under the state bankruptcy law. Under the Texas Insurance Code, exempted accounts include the following: 

• Retirement funds or accounts enjoying special tax exemptions under the U.S. Tax Code
• Retirement and pension benefits for district and county employees, municipal and state employees, elected officials, teachers, firefighters, police officers, and judges
• Survivors benefits for firefighters, law enforcement officers, and emergency medical employees
• Tax-deferred retirement benefits
• Life, health, accident, or annuity benefits
• Uniform group benefit insurance for Texas employees
• Group insurance for Texas public school employees 
• Texas state college or university employee benefits. 

Non Exempt Debts
Although claiming exemptions can ease your hardship and help manage your remaining finances, take note that under the Bankruptcy Code, student loans, child support owed, or unpaid alimony will not be discharged by the bankruptcy court. You still have to pay back your debt to the creditor.
Aside from going through the non-exhaustive list of exemptions above, determining which properties are exempted and which are non-exempt under Texas laws may be done by bankruptcy trustees who are appointed by the country to oversee estates. It may also be done by bankruptcy attorneys hired to litigate a case. Your lawyer will also explain to you all applicable Texas laws and provide you with much needed credit counseling.
If you need help understanding exemptions and bankruptcy filing, you may consult with a Texas bankruptcy attorney Allmand Law Firm, PLLC. Our lawyers are experienced to provide legal counsel in bankruptcy cases and will help protect your assets by maximizing the exemption laws.
Contact our law firm here and schedule your free initial consultation.
The post Bankruptcy Exemptions in Texas appeared first on Allmand Law Firm, PLLC.

More owners are permanently shutting their doors after new lockdown orders, realizing that there may be no end in sight to the crisis.

Gabriel Gordon shuttered his popular barbecue restaurant in California after the state saw a resurgence of coronavirus cases and imposed new restrictions.Credit...Horatio Baltz for The New York Times

By Emily Flitter
July 13, 2020

On the last Friday of June, after Gov. Greg Abbott of Texas said that bars across the state would have to shut down a second time because coronavirus cases were skyrocketing, Mick Larkin decided he had had enough.

No matter that Mr. Larkin, an owner of a karaoke club in Wichita Falls, Texas, had just paid $1,000 for perishable goods and protective equipment in anticipation of the weekend rush. No matter that the frozen margarita machine was full, that 175 plastic syringes with booze-infused Jell-O were in place, or that there were masks for staff members and hand sanitizer for guests.

That day, June 26, Mr. Larkin and his partner dumped what they had just bought into the trash and decided to close their club, Krank It Karaoke, for good.

“We did everything we were supposed to do,” Mr. Larkin said. “When he shut us down again, and after I put out all that money to meet their rules, I just said, ‘I can’t keep doing this.’”

It was harrowing enough for small businesses — the bars, dental care practices, small law firms, day care centers and other storefronts that dot the streets and corners of every American town and city — to have to shut down after state officials imposed lockdowns in March to contain the pandemic.

But the resurgence of the virus, especially in states such as Texas, Florida and California that had begun to reopen, has introduced a far darker reality for many small businesses: Their temporary closures might become permanent.

Nearly 66,000 businesses have folded since March 1, according to data from Yelp, which provides a platform for local businesses to advertise their services and has been tracking announcements of closings posted on its site. From June 15 to June 29, the most recent period for which data is available, businesses were closing permanently at a higher rate than in the previous three months, Yelp found. During the same period, permanent closures increased by 3 percent overall, accounting for roughly 14 percent of total closures since March.

Researchers at Harvard believe the rates of business closures are likely to be even higher. They estimated that nearly 110,000 small businesses across the country had decided to shut down permanently between early March and early May, based on data collected in weekly surveys by Alignable, a social media network for small-business owners.

Christopher Stanton, an associate professor at Harvard Business School who was one of the researchers, said it was difficult to accurately gauge how many small businesses were closing because, once they shut their doors for good, the owners were hard to reach. He added that it could take up to a year before government officials knew the true toll the pandemic was taking on small businesses.

At the moment, 39 states continue to record growing numbers of new cases daily.

It is not clear how many of the businesses Yelp is tracking count as “small” — defined by the Small Business Administration as those with 500 or fewer employees. But the company found that, among the tracked businesses — which include restaurants, retailers and other independent, consumer-facing operations — retail businesses, led by beauty supply stores, have been closing at the highest rate since the pandemic began. Restaurants are the next hardest-hit group.

ImageNick Muscari decided to permanently close Nick’s Sports Grill and Lounge in Lubbock after Texas’s second round of virus closures.Credit...Dylan Cole for The New York Times

Small businesses account for 44 percent of all U.S. economic activity, according to the S.B.A., and closures on such an immense scale could devastate the country’s economic growth. If they were grouped together, small businesses would be among the country’s biggest employers, said Satyam Khanna, a resident fellow at the Institute for Corporate Governance and Finance at New York University School of Law who has written about the effects of the pandemic on small businesses.

So when small businesses close en masse, an entire sector of the economy suffers, Mr. Khanna said. There is lower cash flow, higher debt and more unemployment. “That leads to a big drag on the eventual recovery,” he said. “Because they are such an important source of jobs, losing them the way we are losing them now is going to make things far worse than they otherwise need to be.”

Because small businesses depend heavily on foot traffic and operate on thin margins, they are especially vulnerable to the ripple effects of a widespread shutdown.

For nearly two decades, Rich Tokheim and his wife sold sports memorabilia — hats, T-shirts, coffee mugs and other trinkets — to fans in Omaha at their store, The Dugout. Since 2011, The Dugout has occupied prime real estate across the street from the city’s 24,000-seat baseball stadium, which usually hosts the College World Series each spring.

The 2020 World Series was canceled in March. In the weeks that came after, other sporting events were scrapped — starting with college sports and extending to professional leagues that have struggled to relaunch their activities.

Mr. Tokheim, 58, watched his business fall off with growing unease, but it was only after a friendly chat with a retired college athletic director in May that the gravity of his situation hit home. He was already worried about the state of the virus in Nebraska, and whether there was enough tracking. Then the athletic director predicted that if college football was canceled for the year, it would be the end of Division I sports as a whole.

“That really put me in overdrive,” Mr. Tokheim said. He negotiated an early exit on his store lease and announced a clearance sale at the store. The Dugout closed for good on June 30.

The government’s Paycheck Protection Program, rolled out in April and administered by the S.B.A., earmarked $660 billion of aid for small businesses, but stipulated that a loan would be forgiven only if most of it was used to pay employee wages for eight weeks. The rules were later relaxed, but in a sign of how many small-business owners did not feel confident that they would be on steady ground by the time repayment was due, roughly $130 billion of aid money remained untapped when the program ended in June.

Even for those who took a P.P.P. loan, survival is no guarantee. Nick Muscari, a 38-year-old restaurateur in Lubbock, Texas, received one. His restaurant, Nick’s Sports Grill and Lounge, had been the culmination of Mr. Muscari’s life’s work — his years of toil as a waiter, pizza cook and manager at restaurants and bars beginning in his teenage years. Three years ago, he bought out the two partners who helped him start the restaurant in 2010. He considered it a crowning achievement, but to do so, he had to borrow money. He still owes a bank $80,000.

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Mr. Muscari still owes a bank $80,000 on his now-shuttered restaurant.Credit...Dylan Cole for The New York Times

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Nick’s Sports Grill and Lounge is now up for rent.Credit...Dylan Cole for The New York Times
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“We never had anybody catch the virus in our establishment,” Mr. Muscari said.Credit...Dylan Cole for The New York Times

Mr. Muscari tried to ride out the spring lockdown that temporarily shuttered his restaurant with the help of the P.P.P. money. But when the state’s second closure order took effect on June 26, he decided to close for good.

“It had been in the back of our minds, just like, you know, if this happens again, can we make it?” Mr. Muscari said. “We were following all the rules and people were spread out. We never had anybody catch the virus in our establishment."

Mr. Muscari, with the business closed and its 30 employees jobless, has nothing left but his house and his car. He also expects his landlord to try to sue him for the eight years’ worth of rent he is contracted to pay on his defunct restaurant’s space.

Many small businesses are also finding it onerous keep up with constantly changing local guidelines, while others are deciding that no matter what their local officials say, it just is not safe to keep going. Gabriel Gordon, the owner of a tiny but popular barbecue restaurant in Seal Beach, Calif., decided to close permanently after studying the restaurant’s layout. He had determined that the kitchen would never be safe for multiple staff members to occupy at once while the virus was still active in the area.

“It’s essentially two hallways that are 11 feet wide,” Mr. Gordon said, describing the shape of the restaurant, Beachwood BBQ. “There are food trucks that are larger than my kitchen.”

Whatever the specific reasons may be for each closure, Justin Norman, Yelp’s vice president of data science, said that the federal government should offer small businesses more help. Mr. Norman said Yelp was concerned about the effects of small-business closures, especially those owned by people of color, on society. Yelp, however, also has a financial interest in maintaining a robust small-business environment, because it relies heavily on advertising by businesses on its platform.

“The time is right now to inject more capital or we may lose them forever,” Mr. Norman said. “It’s going to make our economies worse, it’s going to make our communities worse.”