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Provided below is sales data from the sale of 46 unrestricted taxi medallions as reported by the TLC for January 2018, which includes 34 medallions sold in a bankruptcy auction. The estate sales for $245,000, $176,000 and $170,000 may be too low a value because these sales reflect a sale by the estate of a taxi medallion owner who died, and those “desperate sellers” are selling for tax purposes or to quickly dispose of a depreciating asset. Factoring out the foreclosure and estate sales, the fair market value of a medallion based on January sales data appears to be approximately $186,000 based on the 34 medallions sold at the bankruptcy auction. Auction sales with a bidding process often reflect fair market value. Medallion owners with “underwater” medallions (where the loan balance exceeds the value of the medallion) should contact Jim Shenwick to discuss their options under the law.
Price Type of Sale Number of Medallions $380,000
2 $380,000
2 $372,000 Bankruptcy 2 $372,000 Bankruptcy 2 $372,000 Bankruptcy 2 $372,000 Bankruptcy 2 $372,000 Bankruptcy 2 $372,000 Bankruptcy 2 $372,000 Bankruptcy 2 $372,000 Bankruptcy 2 $372,000 Bankruptcy 2 $372,000 Bankruptcy 2 $372,000 Bankruptcy 2 $372,000 Bankruptcy 2 $372,000 Bankruptcy 2 $372,000 Bankruptcy 2 $372,000 Bankruptcy 2 $372,000 Bankruptcy 2 $372,000 Bankruptcy 2 $250,000
1 $250,000
1 $245,000 Estate 1 $185,000
1 $181,000
1 $176,000 Estate 1 $170,000 Foreclosure 1 $170,000 Estate 1 $170,000
1
Every chapter 13 case has creditors – perhaps secured against a car or unsecured, such as a credit card or medical bill. Assuming creditors want to receive payment in your chapter 13 case they are normally required to file a Proof of Claim that details the debt and attaches proof of the debt.
Each creditor listed in your bankruptcy will receive a form they can fill out on-line or by paper. This form is referred to as a Proof of Claim and must be filed with the Bankruptcy Court on a registry of claims. You can obtain a copy of the registry from your attorney or the Bankruptcy Court.
Who gets paid in a bankruptcy?
December 1, 2017 there were some new rules governing the filing of proof of claim forms. Bankruptcy Rule 3001 details the deadlines and requirements for filing a proof of claim. Bankruptcy Rule 3002 describes the requirements for filing a proof of claim or interest. Bankruptcy Rule 3002.1 explains the process for filing a claim secured by a claim or interest in the Debtor’s principal residence. Bankruptcy Rule 3007 explains the process for objecting to claims.
The Debtor may file a proof of claim for those important creditors who failed to do so (such as a taxing authority). Bankruptcy Rule 3004 – gives the option for the debtor or trustee to file a proof of claim upon the expiration of the deadline for the creditor to file the claim. This can be important if the debtor owes back taxes and the taxing authority has not filed a claim. Remember the trustee will pay based on the filed claims, not the debtor’s schedules of what they owe.
Obviously there are many more rules governing claims or the effect of a claim, so it is important that you discuss claims filed by your creditors, or not filed.
The post Proof of Claims in a Chapter 13 Bankruptcy appeared first on Diane L. Drain - Phoenix Bankruptcy & Foreclosure Attorney.
Every bankruptcy case has creditors.
Some creditors may be paid through the bankruptcy, others are not so lucky.
Some creditors are secured against collateral, such as a car or house; while others are unsecured, such as a credit card or medical bill; others are priority claims such as taxes, child support or alimony.
If there are funds to distribute in a bankruptcy each creditor (listed in your bankruptcy) will receive a form they can fill out on-line or by paper. This form is referred to as a Proof of Claim and must be filed with the Bankruptcy Court on a registry of claims. You can obtain a copy of the registry from your attorney or the Bankruptcy Court.
New Rules: Creditors if you snooze – you lose. In other words, no proof of claim = no payout.
December 1, 2017 there were some new rules governing the filing of proof of claim forms. Bankruptcy Rule 3001 details the deadlines and requirements for filing a proof of claim. Bankruptcy Rule 3002 describes the requirements for filing a proof of claim or interest. Bankruptcy Rule 3002.1 explains the process for filing a claim secured by a claim or interest in the Debtor’s principal residence. Bankruptcy Rule 3007 explains the process for objecting to claims.
The Debtor may file a proof of claim for those important creditors who failed to do so (such as a taxing authority). Bankruptcy Rule 3004 – gives the option for the debtor or trustee to file a proof of claim upon the expiration of the deadline for the creditor to file the claim. This can be important if the debtor owes back taxes and the taxing authority has not filed a claim. Remember the trustee will pay based on the filed claims, not the debtor’s schedules of what they owe.
Obviously, there are many more rules governing claims or the effect of a claim, so it is important that the debtor discuss claims filed by their creditors, or not filed.
Additional resources:
Proof of claims
What is a Proof of Claim?
About the Author:
Diane L. Drain is a well known and respected Arizona bankruptcy attorney. She is an expert in both consumer bankruptcy and Arizona foreclosure. Since 1985 she has been a dedicated advocate for her clients and spokesperson for Arizona citizens. As a teacher and retired law professor, Diane believes in offering everyone, not just her clients, advice about the Arizona bankruptcy and foreclosure laws. She is also a mentor to hundreds of Arizona attorneys. 
I would be flattered if you connected with me on GOOGLE+
*Important Note from Diane: Everything on this web site is available for educational purposes only, is not intended to provide legal advice nor create an attorney client relationship between you, me, or the author of any article. Any information in this web site should not be used as a substitute for competent legal advice from an attorney familiar with your personal circumstances and licensed to practice law in your state.*
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The post What is a Proof of Claim in a Bankruptcy? appeared first on Diane L. Drain - Phoenix Bankruptcy & Foreclosure Attorney.
By Tina Moore and Stephanie Pagone
A 61-year-old livery driver posted on Facebook early Monday that city and state politicians were to blame for his financial ruin — then pulled up to the gates of City Hall and shot himself dead with a shotgun, authorities said.
The driver, identified by sources as Douglas Schifter, blamed Mayor de Blasio and Gov. Cuomo as well as former Mayor Bloomberg for making it impossible for him to earn a living behind the wheel because of an increasing number of taxis and black cars in the city, and because of over-regulation of his industry.
“Now the politicians have flooded the streets with unlimited cars and some 3,000 new ones every month still coming. There is not enough work for everybody that pays a living,” Schifter posted around 4:30 a.m.
“This is SLAVERY NOW. … I don’t know how else to try to make a difference other than a public display of a most private affair.”
Schifter then drove a black Nissan Altima that he rented in Pennsylvania to the front, east gate of City Hall near Spruce Street and Park Row, stopped the car and shot himself with a shotgun around 7:10 a.m., police said.
He was pronounced dead at the scene, an FDNY spokesman said. Police sources said he was from Pennsylvania.
“I have no more health insurance and am not enjoying good health,” Schifter wrote in his online manifesto. “No more vehicle as my GM engine failed twice this year as well as the transmission. No more income to pay bills and maxed out credit cards I cannot pay. I will lose my house and everything else. I see no point to continue trying.”
Schifter – who wrote that he worked 100-120 consecutive hours almost every week for more than 14 years — said in his lengthy suicide note that de Blasio, Cuomo and Bloomberg “each had their part in destroying a once thriving industry.”
“There are over 100,000 of us suffering daily now. It is the new slavery. The politicians flooded the streets with Black Cars and Taxis,” he wrote.
“I warned of the impending collapse of the yellow medallions more than a year before it happened. No one stopped it. That old law was working and it was there to prevent exactly what Cuomo Allowed,” he continued. “The control of the numbers of taxi medallions was never supposed to return to the Mayor.”
Schifter blamed Bloomberg for “appealing to Albany to remove the law limiting taxis in NYC.”
“It was in place for over one hundred years and worked! It was there for a reason. It took away control from local politicians. It limited competition so in bad times everyone still made a good living,” he wrote.
“Now there are too many feeding off the same pie and there is not enough for every one,” he said, adding that Bloomberg “added 18,000 unneeded green cabs.”
“That took more business away from Black and Yellow Cabs. He mandated a freeze on processing replacement Black Cars just as I had to replace mine,” Schifter wrote, explaining that he had to buy and insure his car before he could register it.
“TLC would not process my application because they wanted their $75 inspection fee for a brand new car out of the showroom in addition to the state inspection already performed,” he said.
“That cost between $20,000 and $30,000 and was a serious loss,” he said.
The driver also said de Blasio and Cuomo have shown a “bias” toward Uber.
“De Blasio stopped a traffic study on the impact of Uber. That would have revealed the true traffic impact of so many cars and shown the need to freeze car levels,” Schifter said.
“Cuomo allowed the removal of controls and allowed unlimited cars on the road. Cuomo also placed State Troopers in NYC to patrol and issue moving violations. This never happened before in my lifetime. He has turned the city into a police state.”
The disconsolate driver also took aim at the “treasonous Republicans.”
“I hope with the public sacrifice I make now that some attention to the plight of the drivers and the people will be done to save them and it will have not have been in vain and also that we must stop what is happening to Government while we still have one we can vote out,” Schifter said.
“There is no choice. America is under attack by Russia. They do not need weapons. They bought their influence.”
Copyright 2018 NYP Holdings, Inc. All rights reserved.
On the Verge of Bankruptcy? Here Are Your Options
By Bridget Hillyer
In the world of multiple credit cards, payday loans and escalating education costs, debt is a problem many of us face. If your situation becomes overwhelming, it can be tempting to think of bankruptcy as your only available option. Before you make that big step, make sure you understand exactly what it will mean for you and what your other options are.
What Is Bankruptcy?According to James Shenwick, an experienced personal and business bankruptcy attorney from Manhattan, bankruptcy is “when your liabilities exceed your assets or you have insufficient cash flow to service or pay your debt.” To put that more simply, it’s when you don’t have enough money to pay off your bills.
Filing for bankruptcy is when an individual submits their case to the United States Bankruptcy Court in an effort to be declared insolvent. Depending on the individual’s specific situation, they’ll file under a specific chapter of the bankruptcy code, the two most common being Chapter 13 and Chapter 7. Whichever you choose, declaring bankruptcy is a serious decision that should be avoided if at all possible.
How Will Declaring Bankruptcy Affect Me?Although no two situations are the same, bankruptcy comes with a number of potential consequences that anyone considering it should be aware of. The filing itself will stay on your credit report for six to seven years, impacting your ability to get credit for years to come. “Chapter 7 bankruptcy filings more negatively affect an individual’s credit report than chapter 13,” says Shenwick. You may also be required to surrender some of your personal property, depending on which bankruptcy chapter you qualify for. Co-signers for any of your debt may also be required to take sole responsibility for it, and not all debt can be wiped completely free. It will be under the discretion of the court to decide if debt like student loans will qualify. It’s also not free to file, with each chapter requiring a different fee. If you choose to seek legal help to navigate the process, that will also cost you.
How Can I Avoid Bankruptcy?Considering the difficulties associated with declaring bankruptcy, it’s no wonder that people want to avoid it. If your bills have begun to pile up, here are seven steps to help you get yourself back on track and avoid bankruptcy.
Cut Out Unnecessary ExpensesWith bankruptcy looming, you will need to make a number of serious life changes to get yourself out of debt. The first is to cut any expenses that aren’t absolutely necessary. Gym memberships, streaming services, extra data in your phone plan, magazine subscriptions and eating out can all go. While this may seem intense, remember that it’s only intended to be a temporary measure. Bare-bones living for a few months to a year, if it helps get you out of debt, will likely be worth it in the end.
See What You Can SellThat collection of movies and books you haven’t touched in years? Throw them on eBay or have a yard sale. Extra pieces of furniture and collectibles are also great for a quick cash turnaround. Fashion items, such as purses, brand-name sneakers and sunglasses, will earn you some good money if they’re in good enough condition. The website StockX is completely devoted to helping individuals sell their luxury purses, watches and sneakers, so take a look through your own inventory to see what you have to sell. If you don’t need it and you think you could get some money for it, give it a try. Every bit helps.
Get a Second JobIf your current paycheck isn’t enough to cover your bills, then you’ll need to consider taking on a second job. Even if you only have enough time for something on the weekend, like dog walking or working at a coffee shop, the added income will help you pay down that debt faster. If you have a free room in your home, you could take on a roommate, or you could use your car to make money by signing up to be driver for Lyft or Uber. You’ll be busy in the short term, but getting out of debt is worthwhile.
Switch to CashBudgeting your income will be a major part of overcoming your debt, so find a method that works for you. If credit cards are part of the reason you’re now having issues, then switching to cash can be a big lifesaver. Put those cards into an envelope, seal it up and get them out of sight. Set a weekly budget for the necessities and make your everyday purchases with cash. This way, you can physically see when you are getting close to hitting that weekly number. Larger expenses, when absolutely necessary, can be made with a check. The time it takes you to fill one out will act as a reminder to spend wisely.
Contact Your CreditorsCreditors may seem like the enemy at a time when you’re debating bankruptcy, but the truth is, they may be able to work with you. Many will be far more interested in finding a way to settle the situation instead of losing the money they lent you. Negotiate with them and see if they will lower your interest rate and work out a repayment plan. You won’t know until you ask.
Refinance Your MortgageOne solution to high-interest credit card debt is to refinance your home and get cash out. Because your mortgage is secured debt, it has a much lower interest rate than most credit cards. By refinancing, you can use secured debt at a low interest rate to pay off high-interest unsecured debt. This will save you on having to make large interest payments in the future as you work to become solvent again.
Borrow from Friends or FamilySince it can put a serious strain on any relationship, borrowing money from your friends and family should be saved as a last resort. However, if the money will help you reach your long-term solution and isn’t just a temporary fix, then you should give it serious consideration. Make certain that you plan out how you will pay the individual back, and be as clear with those terms as possible before you borrow the money. This will help you both avoid uncertainty and tension in the future.
When Is Bankruptcy Your Only Option?According to Shenwick, “If living on an austerity budget will not provide sufficient cash flow to pay back your creditors in one to two years, then you may want to consider bankruptcy. An experienced bankruptcy attorney can help you make this determination in a 45 minute to one hour consultation.” Remember that declaring bankruptcy isn’t the end of the world. Yes, it’s a serious decision that you should work very hard to avoid having to make, but it can also provide much-needed relief when you’ve run out of options.
© 2000 - 2018 Quicken Loans Inc., All rights reserved.
Before a person can file bankruptcy they must take an approved credit counseling class and their attorney must file a Certificate proving the class was taken with the court. The idea is to make sure that consumers are being educated about alternatives to bankruptcy, and when this new requirement was introduced in 2005 there was hope that such a class would significantly decrease the number of bankruptcy cases being filed each year in the United Sates.
Well, it’s been more than 12 years since these classes have been required, and I have yet to meet a single person who chose not to file bankruptcy because of it. I suppose there probably is a person out there somewhere who was persuaded to avoid bankruptcy, but I can’t name a single person in the thousands of people I have met since 2005 that actually decided to not file bankruptcy because of that class.
Nevertheless, I support the concept of educating clients of each available debt solution. In fact, that is pretty much we do on the initial meeting with new clients. I’m not here to “sell” anybody a bankruptcy case. My job is to identify possible debt solutions and then to help the client select the appropriate course of action. Ironically, the better I explain how non-bankruptcy alternatives work and how much each alternative costs, the more likely it is that a client will choose to file bankruptcy.
But I have to wonder, what would it be like if those who wanted to enroll in a credit counseling repayment plan had to speak to a bankruptcy attorney first?
I wish Jim and Francine Bostick would have spoken to me before they enrolled in a debt management plan in 2010. They owed $120,000 of credit card obligations at the time. Jim, age 67, was in the early stages of dementia. Jim and his wife, Francine, age 57, were persuaded by Housing and Credit Counseling Inc. of Topeka, KS, to enter into a 5-year repayment plan. Instead of spending time with her husband in his last years of life, Francine took on a second job to make ends meet. When they completed their $2,496 monthly payment plan, the National Foundation of Credit Counseling sent out a press release touting the wonderful job done by their counselors. Not everyone thought this was such a wonderful result. See NFCC Celebrates Utter Stupidity and Puts Older Dementia Patient in Debt Management Plan.
Financial writer Liz Weston has criticized the credit counseling industry for not being forthcoming about the failure rate of credit counseling programs and for failing to point out more feasible debt solutions, like filing bankruptcy. See Do Debt Management Plans Work?
Yet there’s one change needed that isn’t coming: Borrowers need to be told that bankruptcy could be a faster, cheaper solution.” Liz Weston.
So what would I have advised Jim and Francine?
- I would have closely examined a list of all their property to see if any of it would be at risk in a bankruptcy case.
- I would have reviewed their current and past income to see if they qualified for Chapter 7 relief and, if that income was too high to qualify for Chapter 7, I would have assessed what they would have to repay each month in a Chapter 13 case.
- I would have looked at debt settlement options and looked for possible assets they could sell to offer creditors without making monthly payments or entering bankruptcy.
- I would have examined their lifestyle to see if they could downsize their home or sell of unnecessary assets to settle or pay the debts.
- If their income was very high I may have recommend they look at a credit counseling repayment program, but since they had to take on 2nd jobs I doubt that was the case.
- I would have considered doing nothing at all. Elderly debtors living on Social Security income who own no real estate are often best off doing nothing at all. Social Security cannot be garnished so if they could endure the collection calls and collection letters, senior debtors are often best off doing nothing at all.
But in the end, I am sure I would have recommend that they strongly consider the bankruptcy option and spend more time focusing on Jim’s health.
You see, my job is to help clients chose their optimal debt solution. I’m not here to sell bankruptcy.
I’m fine if debt settlement was their preferred option since we handle those matters as well. I frequently advise clients to try credit counseling programs when I think a bankruptcy will do more harm than good. I even encourage clients to manage their own debt reduction plans and to empower themselves by learning about the Dave Ramsey “debt snowball” approach. It’s all good. All debt solutions have their place, but when you sit down with a debt professional you should receive an unbiased opinion. That’s what it means to be a professional–to put the client’s needs first.
If credit counseling clients had to see me before they started a debt repayment program, I’m guess half would opt not to start the program. Given that 50% to 75% of all credit counseling repayment programs fail, it appears that credit counselors are pushing clients into programs to make the agency money regardless if that is their client’s best option.
If you are trying to figure out how to get out of debt, look at all your options. Get the best advice from the most professional folks in Nebraska. Consider these options.
- Chapter 7 Bankruptcy
- Chapter 13 Bankruptcy
- Credit Counseling
- Debt Settlement
- Dave Ramsey Debt Snowball
Image courtesy of Flickr and Rachel Kramer
Rue21, a well-known retailer, filed for retailer bankruptcy in May of 2017. If you ever happened to have checked out Rue21’s profit statement, you may have believed the teen-fashion retailer was a big success. In 2016, it received $54 million in revenue.
But rather than holding out a little longer and slipping into considerable debt, Rue21 suddenly filed for bankruptcy. What’s more interesting, however, is that retailers like this are not alone.
Why Did Rue21 File for Bankruptcy If They Are Profiting?
Rue21 is a part of the growing trend of retailers who end up filing for a Chapter 11 bankruptcy reorganization even though they still are proving successful. It is a tactic which could play out during the upcoming months among retailers that struggled during the hectic holiday season.
Several national chains made it through their own bumpy ride by filing for court protection from their creditors in 2017 even though they might have appeared financially balanced to the public. The movement demonstrates the significance of pre-emptive action for retailers that anticipate upcoming financial trouble.
Quite simply, they are proving profitable with their existing operations, but are financially broke due to the fact they are not able to make their payments for owed debt.
Of course, there is a concern regarding whether companies that are still in profit should be permitted to file retailer bankruptcy, which will generally affect product suppliers, retirees, landlords and financial creditors.
Apart from Rue21, national fashion brands True Religion and Payless Shoe Source filed bankruptcy in 2017 and made it out well, at the same time with a lower number of stores. All three of these retailers were making a profit prior to taxes, interest and other items soon before they filed for bankruptcy.
What Is Chapter 11 Bankruptcy?
Filing Chapter 11 enables retailers to break leases on money-losing stores and reduce loans.
The lesson for retailers in the black despondency of Amazon-Walmart prominence and the decline of shopping malls is distinct – the intention of Chapter 11 is to develop a reorganized, generally-smaller company that can get a fresh start.
Certainly, you will discover other possible ways to restructure that don’t include public declaring deficits. Troubled women’s fashion retailer Charlotte Russe announced on Dec. 15 that they had discussed debt cuts with lenders by allowing them full-ownership of the company.
That option seemed sensible for retailers that can encourage creditors to make extreme concessions. But typically, lenders won’t voluntarily provide enough space for retailers to invest in the sort of digital infrastructure they feel is required to remain competitive with Amazon, Walmart and other popular retailers.
As a result, retailer bankruptcy has presented companies like Payless the possibility to start spending in an attempt to gain more online sales and not be so reliant on stores.
What Is Payless’ New Business Strategy After Filing Bankruptcy?
Payless has a second opportunity after it closed about 900 stores and reduced debt that private equity investors had loaded onto the company many years previously.
With roughly 22,000 employees and almost 4,400 stores within 30 countries during the time of its retailer bankruptcy, Payless had developed an impressive global brand. Still, several problems compromised the company’s operations. It had a restricted digital existence, prices that had exceeded too high after some time and the company had slipped behind its competitors.
But with considerably less debt right after the retailer bankruptcy, Payless is ready to reinvest in digital infrastructure and start a global business expansion with hundreds of brand new stores in under-served markets located in Mexico, rural Brazil, Africa and India.
Details About Retailers Profits Prior to Filing Bankruptcy
Comparable to Payless, both Rue21 and True Religion were profitable shortly before bankruptcy. Rue21’s showed decent 2016 earnings. True Religion revealed a pretax profit of $7.1 million within the initial five months of 2017 just before the company filed for court protection.
Both fashion brands went into bankruptcy as their debt loads became too uncontrollable and unsuccessful stores pulled them down.
The effects of their bankruptcies advise that retailers can endure their brush with financial distress, unlike Borders, Circuit City and Sports Authority which liquidated soon after filing. Approximately 1 in 5 True Religion locations closed in bankruptcy. Rue21 shut down about 1 in 3 of its stores.
How Vendors Affect a Retailer’s Decision to File for Bankruptcy
Numerous retailers wind up requiring retailer bankruptcy to pull through simply because the minute their vendors suspect possible financial trouble, they worry about maintaining their shipments and obtaining immediate payment.
This is exactly what has happened to retailers like Toys R Us. Without having products to sell or the advance cash to pay, companies like Toys R Us can’t pull through without the legal auspices of retailer bankruptcy.
When to Consider Filing for Retail Bankruptcy
Every case is different and depends on a large variety of factors. If you are questioning the benefits of filing for retailer bankruptcy, speak with a bankruptcy attorney at Northwest Debt Relief Law Firm. For a free initial consultation, call 206-488-0555, today!
The post Retailer Bankruptcy: Why Retailers File for It When They’re Not Even Broke appeared first on Portland Bankruptcy Attorney | Northwest Debt Relief.
Rue21, a well-known retailer, filed for retailer bankruptcy in May of 2017. If you ever happened to have checked out Rue21’s profit statement, you may have believed the teen-fashion retailer was a big success. In 2016, it received $54 million in revenue.
But rather than holding out a little longer and slipping into considerable debt, Rue21 suddenly filed for bankruptcy. What’s more interesting, however, is that retailers like this are not alone.
Why Did Rue21 File for Bankruptcy If They Are Profiting?
Rue21 is a part of the growing trend of retailers who end up filing for a Chapter 11 bankruptcy reorganization even though they still are proving successful. It is a tactic which could play out during the upcoming months among retailers that struggled during the hectic holiday season.
Several national chains made it through their own bumpy ride by filing for court protection from their creditors in 2017 even though they might have appeared financially balanced to the public. The movement demonstrates the significance of pre-emptive action for retailers that anticipate upcoming financial trouble.
Quite simply, they are proving profitable with their existing operations, but are financially broke due to the fact they are not able to make their payments for owed debt.
Of course, there is a concern regarding whether companies that are still in profit should be permitted to file retailer bankruptcy, which will generally affect product suppliers, retirees, landlords and financial creditors.
Apart from Rue21, national fashion brands True Religion and Payless Shoe Source filed bankruptcy in 2017 and made it out well, at the same time with a lower number of stores. All three of these retailers were making a profit prior to taxes, interest and other items soon before they filed for bankruptcy.
What Is Chapter 11 Bankruptcy?
Filing Chapter 11 enables retailers to break leases on money-losing stores and reduce loans.
The lesson for retailers in the black despondency of Amazon-Walmart prominence and the decline of shopping malls is distinct – the intention of Chapter 11 is to develop a reorganized, generally-smaller company that can get a fresh start.
Certainly, you will discover other possible ways to restructure that don’t include public declaring deficits. Troubled women’s fashion retailer Charlotte Russe announced on Dec. 15 that they had discussed debt cuts with lenders by allowing them full-ownership of the company.
That option seemed sensible for retailers that can encourage creditors to make extreme concessions. But typically, lenders won’t voluntarily provide enough space for retailers to invest in the sort of digital infrastructure they feel is required to remain competitive with Amazon, Walmart and other popular retailers.
As a result, retailer bankruptcy has presented companies like Payless the possibility to start spending in an attempt to gain more online sales and not be so reliant on stores.
What Is Payless’ New Business Strategy After Filing Bankruptcy?
Payless has a second opportunity after it closed about 900 stores and reduced debt that private equity investors had loaded onto the company many years previously.
With roughly 22,000 employees and almost 4,400 stores within 30 countries during the time of its retailer bankruptcy, Payless had developed an impressive global brand. Still, several problems compromised the company’s operations. It had a restricted digital existence, prices that had exceeded too high after some time and the company had slipped behind its competitors.
But with considerably less debt right after the retailer bankruptcy, Payless is ready to reinvest in digital infrastructure and start a global business expansion with hundreds of brand new stores in under-served markets located in Mexico, rural Brazil, Africa and India.
Details About Retailers Profits Prior to Filing Bankruptcy
Comparable to Payless, both Rue21 and True Religion were profitable shortly before bankruptcy. Rue21’s showed decent 2016 earnings. True Religion revealed a pretax profit of $7.1 million within the initial five months of 2017 just before the company filed for court protection.
Both fashion brands went into bankruptcy as their debt loads became too uncontrollable and unsuccessful stores pulled them down.
The effects of their bankruptcies advise that retailers can endure their brush with financial distress, unlike Borders, Circuit City and Sports Authority which liquidated soon after filing. Approximately 1 in 5 True Religion locations closed in bankruptcy. Rue21 shut down about 1 in 3 of its stores.
How Vendors Affect a Retailer’s Decision to File for Bankruptcy
Numerous retailers wind up requiring retailer bankruptcy to pull through simply because the minute their vendors suspect possible financial trouble, they worry about maintaining their shipments and obtaining immediate payment.
This is exactly what has happened to retailers like Toys R Us. Without having products to sell or the advance cash to pay, companies like Toys R Us can’t pull through without the legal auspices of retailer bankruptcy.
When to Consider Filing for Retail Bankruptcy
Every case is different and depends on a large variety of factors. If you are questioning the benefits of filing for retailer bankruptcy, speak with a bankruptcy attorney at Northwest Debt Relief Law Firm. For a free initial consultation, call 206-488-0555, today!
The post Retailer Bankruptcy: Why Retailers File for It When They’re Not Even Broke appeared first on Portland Bankruptcy Attorney | Northwest Debt Relief.
As many of the readers of our blog are aware, we’ve developed a practice representing taxi medallion owners who own “underwater” taxi medallions. An underwater taxi medallion is a medallion valued at less than the bank loan for the medallion. This blog post is about a successful workout which we negotiated for the owner of an underwater taxi medallion.
The facts of the case are as follows: he owns a house with his wife. His other significant asset is the ownership of the medallion for the taxi that he drove each week. He was an extremely hard-working man (a new immigrant to America) and he was driving 60 to 90 hours a week. The taxi medallion loan was approximately $660,000 and we estimated the value of the taxi medallion at $175,000 to $185,000.
Unfortunately, due to the competition from Uber, Via and Lyft, notwithstanding the fact that my client was working 60 to 90 hours a week, he was barely making enough money to feed his family, pay the mortgage on his house and cover his driving expenses each week. Regrettably, he stopped making payments on the taxi medallion bank loan. The bank that held the loan commenced a foreclosure action against the medallion.
Prior to retaining us to assist him with his taxi medallion issues, he retained another attorney who advised him to file a chapter 13 bankruptcy petition that listed the medallion as having no value. His case was dismissed because of the inaccurately low valuation for the medallion.
The medallion owner was extremely frustrated and was referred to us. We met with him and asked for a list of property he owned (assets), who he owed money to (his liabilities), his after tax monthly budget and the taxi medallion loan documents. The client indicated that he did not want to refile for personal bankruptcy, but he was amenable to a workout with the bank. We contacted the bank’s counsel, who agreed to stay the state court action, so we could review the file and commence negotiations.
Prior to entering workout negotiation, we do “asset protection planning” for the client. As part of our due diligence, we requested that the client send us a copy of the deed for the house that he owns with his wife. Upon reviewing the deed, we discovered that his real estate attorney had improperly drafted the deed and the house was not held as “husband and wife” with tenancy by the entirety protection for house.
Under New York State law, in the New York metropolitan area, each owner of a house who resides in the house has a homestead exemption of $165,500 (for a married couple $331,000). If the house is owned as tenants by the entirety and one spouse owes money to a creditor, that creditor can obtain a judgment against the taxi medallion owner (debtor) and docket the judgment against the house (which is owned as tenants by the entirety) but cannot foreclose on the house. Effectively, the judgment, which under New York State law is good for 20 years, will prevent the husband and wife from selling or refinancing the house, but the creditor can’t force a sale of the house at a foreclosure or other sale of the house if the non-debtor spouse is alive and living there.
We advised the client to contact his real estate attorney immediately and correct the deed by filing a warranty deed – which they did. Because of the corrective deed being filed with the county clerk, the client’s house was now protected from the reach of the medallion lender bank due to the NYS homestead exemption and tenancy by the entirety protection!
Negotiations commenced, but unfortunately the medallion bank was unreasonable in their demand with respect to a settlement and the taxi needed to be repaired or replaced. So, the strategy that we agreed upon was to voluntary surrender the medallion to the Taxi and Limousine Commission (TLC) and the meter and the taxi radio and other equipment were returned to their vendor.
The bank was then able to obtain the medallion from the TLC. The voluntary return of the taxi medallion to the TLC and the client’s asset protection planning were key to settling the action. Ultimately, when the “dust settled”, the bank obtained possession of the medallion (its collateral for the loan), the client kept his house, the State court litigation was discontinued and the client no longer had to worry or maintain an asset (the medallion) that had little value.
Jim Shenwick
As many of our readers know, Shenwick & Associates has developed a specialty representing taxi medallion owners with "underwater " medallions (underwater medallions are medallions valued at less than the bank loan). We were recently retained by a client who was at her wits’ end. She co-owned a medallion; the medallion loan had matured, and her partner refused to sign a loan extension. If the medallion loan wasn’t extended, the bank indicated that they would foreclose on the medallion and sell it to repay the loan. Due to the depressed market value of medallions, now would not be the optimal time for a foreclosure sale!
The medallion owner was extremely stressed, so she went online and searched for attorneys with taxi medallion experience. She saw our blog, read a few the posts and called to set up an interview with Jim Shenwick. We asked her to bring in a list of property that she owned (assets), creditors she owed money to (liabilities), an after tax monthly budget for herself and the taxi medallion loan documents that she executed with the bank.
The client indicated that she did not want to file for bankruptcy, she wanted to keep the medallion and she wanted to extend the loan, if possible. She then retained us to handle the matter. Jim Shenwick called the attorney representing the co-owner. Fortunately, the co-owner’s attorney was reasonable and knowledgeable, agreed with our analysis of the situation, and counseled his client that a sale of the medallion or a foreclosure (which could result in relief of indebtedness income being reported to the Internal Revenue Service pursuant to § 108 of the Internal Revenue Code) was not in either party’s best interest.
We then discussed why his client did not want to extend the bank loan for the medallion, and he indicated that his client was aging and that notwithstanding the fact that his client was legally liable to repay the bank loan, the economic benefit of the prior loan accrued to our client (which we confirmed with her). He suggested that the owner’s enter into an indemnification and hold harmless agreement, which provided that the lease payments from the medallion would go to service the loan, and if there was a default on the loan, that would be the responsibility of our client and not the co-owner. Both parties agreed to these terms and the agreement was drafted and executed. The co-owner then executed the loan extension agreements with the bank and the loan was extended at a low interest rate for three years. The settlement between the two medallion owners and the medallion owners and the bank was advantageous for all parties.
Jim Shenwick
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