Blogs
Commercial leases in New York City,
COVID-19, Recent Protests and a
Strategy to Terminate
Commercial LeasesAs a result of COVID-19, recent protests and the advent of
technologies such as Zoom and Google Meet, many
tenants have excess office space/s that they cannot or
do not want to continue to rent and would like to end
or terminate their lease or stop paying rent.
At Shenwick & Associates, we have received many calls
from clients with these issues and we have developed a
strategy to address them.
First, we review the company's financial information
including a recent balance sheet, income statement,
the commercial lease and guaranty, if any.
Second, we determine if the company is a candidate for
a bankruptcy filing, either chapter 7 (a liquidation where the
company closes as a result of the filing), a small business
Subchapter 5 bankruptcy filing, or a full-blown chapter 11
business bankruptcy filing.
In the case of a Chapter 7 filing, the lease will terminate;
however, the Chapter 7 bankruptcy trustee appointed to
the case will also liquidate or close the business. For
businesses that are losing money or do not see a bright
future, this may be a good strategy.
A company that wants to remain in business, but terminate
or reject their lease, should consider a bankruptcy filing
under new Subchapter 5, which is a fast-paced, less
costly chapter 11 business bankruptcy filing. As part of a
Subchapter 5 bankruptcy filing, the lease can be rejected,
and the landlord would be paid their lease rejection
damages and other monies owed over 5 years or less from
disposable income of the business.
If Subchapter V does not work due to the debt limit of
$7,500,000 or for other reasons, a company can consider
a full-blown chapter 11 bankruptcy filing. However, they
would want to consider the cost from a chapter 11 filing,
versus the expected savings from rejecting the lease.
Chapter 11 is a complicated, risky and expensive process
for many companies.
Another strategy that we have been using with
much success is preparing a bankruptcy petition,
without filing the petition (a so called Pro-Forma
Bankruptcy Petition).
This bankruptcy petition would accurately disclose the
assets, liabilities and earnings of the company. Then we
would forward that bankruptcy petition to the landlord
or their counsel indicating that if the tenant and landlord
cannot reach an agreement where the tenant is allowed to
terminate their lease (pursuant to a Lease Surrender
Agreement), then the tenant or company will file for
bankruptcy. The benefit of this strategy is that it is quick,
relatively inexpensive, the landlord gets financial disclosure
regarding the company or tenants finances upfront
without litigation or discovery and we convince the landlord
that releasing the tenant from their lease is a “win-win” for
both the tenant and the landlord.
How is this strategy a win for the landlord? The
landlord keeps the tenant’s security deposit, the
Landlord will also save substantial money on
bankruptcy and landlord tenant legal fees, they
remove an unprofitable tenant from their building,
and they obtain possession of the premises quickly allowing
them to re-let the space.
One of the reasons that we have had much success with this
strategy in these trying times is that we have been filing
bankruptcy petitions for individuals and businesses for
over 20 years and the landlord or their counsel can Pacer
our law firm’s bankruptcy filings, or visit our
website and blog.
Based upon our work and experience in this area
of the law,
landlords realize that bankruptcy is a real option
for the tenant not an idle threat.
Clients or their advisors who would like to
discuss these strategies with Jim Shenwick
or schedule a consultation can reach him at:
phone: 212-541-6224
or email: [email protected]
A Chapter 13 bankruptcy plan requires a debtor to satisfy unsecured debts by paying all “projected disposable income” to unsecured creditors over a five-year period. In a recent case before the U.S. Court of Appeals for the Sixth Circuit (the “Sixth Circuit”), the court grappled with whether a Chapter 13 debtor’s wages that are contributed to an employer-sponsored retirement plan are considered disposable income under the Bankruptcy Code.[1] Read More ›
Tags: 6th Circuit Court of Appeals, Chapter 13
A Chapter 13 bankruptcy plan requires a debtor to satisfy unsecured debts by paying all “projected disposable income” to unsecured creditors over a five-year period. In a recent case before the U.S. Court of Appeals for the Sixth Circuit (the “Sixth Circuit”), the court grappled with whether a Chapter 13 debtor’s wages that are contributed to an employer-sponsored retirement plan are considered disposable income under the Bankruptcy Code.[1] Read More ›
Tags: 6th Circuit Court of Appeals, Chapter 13
The bankruptcy process involves a set of federal laws designed to help individual and business debtors who cannot pay what they owe. All 94 federal judicial districts handle bankruptcies. Bankruptcy filings are done with the bankruptcy court in almost all of them. Federal bankruptcy courts have jurisdiction over bankruptcy cases, so they cannot be filed with a state court.
According to bankruptcy laws, filers who liquidate their assets to pay off their debts, or craft and carry out a repayment plan to pay back their creditors in a set period of time can have a fresh start. The Bankruptcy Act also protects businesses in trouble, providing them a means for orderly debt repayment through liquidation or reorganization. Either bankruptcy procedure is covered in the Bankruptcy Code, the three main chapters of which are Chapter 7, Chapter 11, and Chapter 13. The majority of bankruptcy petitions are filed under them.
The bankruptcy law is in place to achieve these purposes:
- To allow a bankrupt but honest debtor to start afresh by eliminating most of his or her debts.
- To make sure that debtors who have an available property for liquidation repay their creditors and do so in an organized manner.
Bankruptcy proceedings typically start with a debtor filing a petition for bankruptcy with a United States bankruptcy court. A bankruptcy filing may be done by an individual, by a married couple, or by a business or organization. Those who file for bankruptcy must also include statements enumerating their income, assets and liabilities, debts, and creditors. Filing for bankruptcy triggers the automatic stay, which stops all collection efforts from creditors, collection agencies, and other debt collectors. While the stay is in place, the debtor is covered with bankruptcy protection, and his or her creditors may not file or continue lawsuits, attempt wage garnishment, or even make a simple phone call to demand payment.
After the debtor has filed a bankruptcy petition, the clerk of court will send notice to the relevant creditors. In many Bankruptcy Chapter 7 cases, very little or no money is available from the bankruptcy estate to give to each creditor. For this reason, they have fewer incidents of dispute and the filer gets a bankruptcy discharge without objection. Once debts are discharged, the debtor is no longer liable for their payment.
When disputes over property ownership and worth, the amount of debt owed, et cetera are raised in a bankruptcy case, they may result in litigation. The bankruptcy court handles litigation in pretty much the same way the district court handles civil cases. This means a process that may include discovery, pre-trial proceedings, settlement efforts, and the actual trial.
Dealing with Bankruptcy Concerns? Contact an Oregon Bankruptcy Attorney Today!
Filing bankruptcy can be a confusing and overwhelming undertaking for a debtor in financial distress. It’s important to take every step carefully and make informed choices. Hiring a bankruptcy lawyer to advise and guide you throughout the experience is the smart move to make. If you’re considering bankruptcy, give us a call at Northwest Debt Relief Law Firm to schedule a consultation with one of our skilled and experienced Oregon bankruptcy attorneys.
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The post How Bankruptcy Works appeared first on Vancouver Bankruptcy Attorney | Northwest Debt Relief Law Firm.
Diane and Jay helped out a family member file a bankruptcy. They were very easy to work with during a their difficult time. Compassionate and very helpful getting through the bankruptcy process. Some firms make you feel like a number and just want you to do the bankruptcy that benefits them more. Not Diane. Reviewed all the info thoroughly to help make best decisions. Always available for follow up questions and really knowledgeable about bankruptcy laws. We were fortunate to find her.
S.E.
Some firms make you feel like a number and just want you to do the bankruptcy that benefits them more. Not Diane.
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The post Diane and Jay helped out a family member file a bankruptcy. appeared first on Diane L. Drain - Phoenix Arizona Bankruptcy Attorney.
Consumer Financial Protection Bureau – pros and cons of Supreme Court decision
The question – can a President remove the Director of Consumer Financial Protection Bureau (CFPB) ‘just because’?
The answer – yes. But then it gets a little more complicated. The bottom line – The director of the CFPB is exposed to the whim of a president who wants everyone to do their bidding, no matter the consequences to the consumer. If the president cares about you and me more than big business, that is good. But, if the president cares more about big business than you and me, that is bad. The goods news – CFPB is still alive and kicking. For those late to the party – the CFPB is one of the few organizations designed to protect you and me (the consumer).
The CFPB core functions:
According to the CFPB website, the CFPB was created to provide a single point of accountability for enforcing federal consumer financial laws and protecting consumers in the financial marketplace. Before, that responsibility was divided among several agencies. Today, it’s our primary focus.
Our work includes:
- Rooting out unfair, deceptive, or abusive acts or practices by writing rules, supervising companies, and enforcing the law
- Enforcing laws that outlaw discrimination in consumer finance
- Taking consumer complaints
- Enhancing financial education
- Researching the consumer experience of using financial products
- Monitoring financial markets for new risks to consumers
Sheila Law v. CFPB: Winners and Losers (a reprint from Credit Slips) July, 2020
posted by Adam Levitin (see some great quotes at the end of Mr. Levitin’s entire post – ‘Read More’)
The Supreme Court’s long-awaited decision about the CFPB’s constitutionality is out. It’s a tricky opinion to parse politically. The Court, in a 5-4 partisan decision, held that the CFPB’s structure violates the separation of powers because of the for-cause only removal provision for the CFPB Director in conjunction with the Bureau’s other features. Accordingly, the Court found that the Director must be removable at will. Here’s my attempt to lay out the winners and losers. As you’ll see, they do not track with the headlines of the CFPB losing—the CFPB was actually the winner here for most purposes.
Winner: The CFPB
The CFPB walks away from Seila Law still standing tall and able to do everything it could the day before the decision. Don’t lose sight of that. You can see this in part by counting the votes. While it was 5-4 (with conservatives in the majority) that the CFPB is unconstitutional, it was 5-4 (liberals + Roberts) on the severability issue, which keeps the agency alive. While the case was a tactical loss for the CFPB, it was actually a strategic victory. If there’s one big picture take away, that’s it. The CFPB functionally won here.
Winner: A Biden Administration
The most immediate practical effect of the decision is that a President Biden can fire CFPB Director Kraninger on Day One of his administration. That’s a good thing for those who want to see a more active CFPB right now. In the short term, the Supreme Court might have given a Biden administration a real gift. Indeed, I found it very strange to see the Kraninger CFPB send out an email scheduling an event for March 2021. That might be optimistic in light of the decision.
Possible Loser: CFPB Independence
While the CFPB did score a general win, the decision might affect how the CFPB behaves in the future. The lack of a for-cause-only removal protection might have a chilling effect on future CFPB Directors. If a future CFPB Director is too aggressive, the financial services industry will surely lobby the President to fire the Director. Whether the industry will have enough pull with a future administration to actually get a Director removed or for the White House to get involved is far from certain, however. In other words, the trade-off here is that there’s a possibility of putting in a more active Director in January 2020, but that such Director and any future Director will face a political constraint of some type going forward.
MUSINGS FROM DIANE:
Politics and politicians can be bullies. “Bullying is the use of force, coercion, or threat, to abuse, aggressively dominate or intimidate. The behavior is often repeated and habitual.” (Wikipedia). As soon as Trump got in the White House he started attacking the CFPB. Why you ask? Because he is not a champion of consumer rights (don’t trust me – look at his history). The CFPB was born out of a group, lead by Elizabeth Warren, who were tired of consumers (that you and me) getting ripped off by big business – such as banks, mortgage companies, credit card companies, payday lenders, shady student loan companies, etc. Richard Cordray was the first Director (under Obama), later Trump put his own shills in as directors – Mick Mulvaney (as Acting Director), then Kathleen Kraninger.
From its creation until 2017, the CFPB “has curtailed abusive debt collection practices, reformed mortgage lending, publicized and investigated hundreds of thousands of complaints from aggrieved customers of financial institutions, and extracted nearly $12 billion for 29 million consumers in refunds and canceled debts.”
The post Supreme Court Decision – Consumer Financial Protection Bureau appeared first on Diane L. Drain - Phoenix Arizona Bankruptcy & Foreclosure Attorney.
If you are filing bankruptcy, Get Your Money Out of Wells Fargo. People filing bankruptcy get kicked when they are down, if they bank at Wells Fargo. Wells Fargo sees your bankruptcy on your credit report and they freeze your checking and savings account. At least they do if you have more than five thousand […]
The post Get Your Money Out of Wells Fargo by Robert Weed appeared first on Northern VA Bankruptcy Lawyer Robert Weed.
If you are filing bankruptcy, Get Your Money Out of Wells Fargo. People filing bankruptcy get kicked when they are down, if they bank at Wells Fargo. Wells Fargo sees your bankruptcy on your credit report and they freeze your checking and savings account. At least they do if you have more than five thousand […]
The post Get Your Money Out of Wells Fargo by Robert Weed appeared first on Northern VA Bankruptcy Lawyer Robert Weed.
July 5, 2020
Yahoo News
- The application deadline for the Paycheck Protection Program was extended on Saturday after President Donald Trump signed the extension bill that Congress passed into law.
- Potential applicants now have until August 8 to request federal relief funds under the program intended to help businesses affected by the coronavirus pandemic.
- Around $130 billion in funds were left over when the original deadline came on June 30, with some businesses not knowing they are eligible for the program.
- Visit Business Insider's homepage for more stories.
President Donald Trump on Saturday signed into law an amendment to the Paycheck Protection Program that gives businesses affected by the coronavirus pandemic more time to apply for federal funds.
The law extends the deadline to apply for the federal government's loan-based relief program to August 8. The original deadline to apply for the loans was June 30, but Congress moved quickly to extend the deadline after around $130 billion was left over from the initial $660 billion pot, NPR reported.
The Senate initially approved the extension on Tuesday with unanimous consent, and the House of Representatives followed suit the next day. Trump signed the bill on July 4, giving potential recipients just over a month to apply for the remaining funds.
As of June 30, more than 4.8 million loans have been approved totaling $520 billion, with the average loan amount around $107,000, according to the Small Business Administration.
Here's what potential applicants should know before applying.
What are Paycheck Protection Program fundsPaycheck Program Funds are federally backed loans that businesses can apply for to help cover expenses and maintain worker levels. Though they start as loans, businesses that meet specific criteria from the SBA can apply to have their loans forgiven so that they don't need to be paid back.
Part of the program is that no fees will be attached to the loans for small businesses, no collateral is required, and repayment starts after six months. Interest rates are also set at 1%, according to the SBA.
Who can apply for Paycheck Protection Program FundsWhile the program is intended for small businesses, that title covers more than just family-owned hardware stores and ice cream shops. As Business Insider's Dominick Reuter reported, freelancers and self-employed workers including gig-workers can also apply for funds.
Businesses with more than 500 employees can also access funds if they meet the SBA's size standards. Business owners who are unsure of whether their enterprise counts as a small business can use the SBA's size standards tool, located on its website.
What July and August applicants need to knowLoan applicants completing the process after June 5 are subject to new loan maturity guidelines. The SBA said recipients who applied before June 5 will be subject to a two-year maturity timeline while those applying after June 5 will have a five-year maturity timeline.
Loans are also processed through local banks and lenders to streamline the process as opposed to having the federal government do it. The SBA provides a list of which lenders can process applications for and issue PPP loans on its website.
How to get loans forgiven by the federal governmentThe SBA's website says loan forgiveness will be based on "employee retention criteria" and only be given if the funds are spent on "eligible expenses." The Payroll Protection Flexibility Act recently amended the program's rules so that only 60% of funds received have to go to payroll expenses in order for loans to be forgiven, as Business Insider's Joseph Zeballos-Roig reported.
Even if borrowers don't use 60% on payroll, they can still apply for partial forgiveness. Businesses seeking this option need to fill out a five-page form that can be found on the SBA's website to apply for forgiveness after reviewing the rules for forgiveness.
We may tell our children in years to come that there was a time, especially if it was during rush hour on a rainy day, when you couldn't get a cab in New York City for love or money. These days, the streets are mostly empty. It's estimated that 90% of the taxi business has dried up.
That's part of the reason why the city, with help from the National Guard, started a program that pays cab drivers to deliver food to low-income housebound residents.
Mouhamadou Aliyu, a yellow cab driver of many years standing, gets up before dawn to participate. He knows there's a health risk: "But this is my home, and yellow is what I do," he explained. "Right now, there is a pandemic. Our people, they are suffering. The city call us. We are answering the call."
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Yellow cab driver Mouhamadou Aliyu. CBS NEWS
Drivers earn $53 a route. Each route entails about six deliveries, and it means waiting in line for hours to get fully loaded; lugging boxes of food up into crowded apartment complexes; and then cleaning up for the next run.
"It's very hard. It's very tough. Very challenging," Aliyu said.
Nine hours, most of it waiting; two delivery runs = $106 for a day's work. Not even close to the amount he needs to pay even a fraction of his monthly expenses.
"But, we're still hopeful," Aliyu told "Sunday Morning" special contributor Ted Koppel. "We're New Yorkers. We don't give up!"
As a young immigrant from West Africa back in 1994, Aliyu saw Manhattan through rose-colored glasses: "I came here with nothing, nothing at all. This was my dream. As a yellow cab driver, to hold a medallion is like being on top of my game. This is where I want to be. This is the American dream."
In 2003, he became an American citizen. By 2004, Aliyu had learned that you don't get rich just driving a cab; to make money, he was told, you need to own the taxi – and to own it, you need a special license: a medallion.
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CBS NEWS
The city paid for ads promoting the deal as essentially risk-free; and it was New York City that has made literally billions of dollars selling these medallions at auction. When there are more buyers than medallions, the price goes up. That, in theory, is where even an immigrant cab driver could get rich: "So I said, 'Why not?' But, in order for me to place a bid to go for the medallion, I have to raise $20,000. But I have only $7,000. So, I apply for credit card. I get approved. I call them, I say, 'Can I use it for anything I want?' They say, 'Yes, it's your money. You can do whatever you want with it.'"
Koppel said, "Then you had $13,000 that you had on your two credit cards. $20,000 cash down, on a $331,000 bid."
"Yes, that would be a loan. And you have to pay for the car, gas, maintenance, all that. But still, life was good. Even I would say life was great."
Within about a year Aliyu's medallion had appreciated more than $100,000, and remarkably, the value kept rising. "Lucky me, I was able to buy a house here in the Bronx, a three-family house," He said. "So, things was good. And then, moving forward, the medallion value was going up. In 2013 the city auctioned medallion at $1,350,000."
Seven years ago – in theory, on paper – Aliyu was a millionaire.
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CBS NEWS
"The only reason that it was worth over a million dollars was that there was some other immigrant who could be taken advantage of to pay that amount," said New York Times reporter Brian Rosenthal. "And not really even pay that amount, but be trapped in a loan that would shackle them in debt for the rest of their lives."
Rosenthal won a Pulitzer Prize for his series exposing the taxi medallion scam. As he explained in the Times' documentary series "The Weekly," those medallions were money-makers … just not for the drivers.
"There was the city which sold the medallions, the brokers who collected commissions, and the bankers who wrote the loans and sold some of them for profit," he said. "And what we found in our reporting was that the value of the medallion went from $200,000 to over a million dollars, when the revenue that it had to bring in did not change at all.n Eventually, you realize that this wasn't by accident. Many insiders knew that the whole thing was a house of cards.
"The loans were never stable," Rosenthal said, "they were never sustainable, and they were always going to be a burden that was unpayable after this bubble popped. And that's what happened."
Last summer, the New York City Council held a hearing on what was called the owner-driver crisis. Mouhamadou Aliyu was one of the witnesses:
"Every single day, every single hour, I think about taking my own life," he told city officials. "I think about suicide. The only thing that stops me is my four kids. If I do so, what's going to happen to them? I'm supposed to be a millionaire today, and I'm proud of it. And you guys are trying to take that away from me. It's not acceptable. I'm calling on you: Please! Please! Have mercy on us. Help us."
Koppel said of Aliyu's testimony, "He speaks rather plaintively of his status as a millionaire: I'm a millionaire. He's never gonna see that day again, is he?"
"No, he's not," Rosenthal said. "I mean, he deserves it. He works very hard. I've met hundreds of these cab drivers, and they all work extremely hard."
Many of the drivers are convinced that ride-share companies – like Lyft and Uber – ruined their business. Even without them, though, said Rosenthal, the medallion bubble had to burst.
Six months ago, said Aliyu, the medallion was worth less than $100,000. What he still owes on that medallion, however, is more than $600,000. The chances that he'll ever be able to pay that off? Slim and none.
One slender ray of sunshine: New York State's Attorney General is preparing to sue the City of New York to the tune of more than $800 million for misleading medallion owners. It could take years, and even that sum wouldn't make the drivers whole again.
And then, of course, there's the pandemic. Well over 50 cab drivers have died from the virus since March. Most drivers these days are staying home; the few available fares just aren't worth the health risk.
Aliyu said, "There is no more sleep. There is no night. At night we chat on the WhatsApp group, we're so worried. If nothing is done, when this pandemic will be over, the yellow cab industry will be over, too, will be finished."