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Things have not been so great for a lot of Texans this year.  To put it mildly, there has been a lot of doom and gloom spreading across our airwaves since the middle of March.  If you have listened to the radio, a current events podcast, or watched the news at all (and we understand if you have tried to stay away), you know that a major topic that has been discussed at length recently is the deadlock between our government leaders in Washington over the creation of new legislation that will extend certain benefits and provide needed resources to businesses and individuals all across America.  Sadly, it appears that progress has been stifled by deeply held convictions over what kind of support is needed, how much should be given, and of course, to whom.  As we continue to struggle in our fight to contain the spread of the novel Coronavirus that causes COVID-19, one thing is clear: the world is continuing to move forward, with or without a new stimulus package, and businesses and people in Texas and all across the country are struggling to stay afloat.
Much of the media discussion has focused on the expiration of the Cares Act, which officially ended last week and the ramifications that its conclusion will have for people who are currently receiving unemployment funds (with the $600 bonus included).  But it wasn’t only the additional unemployment benefits that expired when the first stimulus program ended.  Many protections for renters are also expiring or have expired, and moratoriums on evictions that have been in place since the beginning of the COVID-19 pandemic started to expire as well.  This has created a serious problem for Texans who are out of work, have had their hours or wages slashed, or have been furloughed at their jobs, and are having difficulty paying the rent.
With all the stresses that go with job loss and underemployment, many are now facing the additional threat of having to move and/or the potential of homelessness as well.  In these dire times of uncertainty, and with the ever-present threat of a continuing and escalating global pandemic upon us, what is the best option for tenants who need a place to live, and for the landlords who still need to collect rent and earn income on their properties?
In a word, the best and first step is always communication.
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Before you jump headfirst into that mandatory conversation with your landlord, you need to take a moment to breathe, collect your thoughts, and come up with a plan.  Just like coaches prepare before a football game, and business owners prepare for a big presentation, you as an at-risk tenant need to first decide on a game plan and determine what you want to achieve. 
For example:

• Do you want to stay in the property and bring the rent current?
• Do you want additional time before you decide whether or not to move out?
• Are you ready to move out now, but just need some extra time to move to find another place?

Let’s look at scenario one first. If the goal is to stay in the property and bring the rent current, then you need to consider a few factors, including how much additional time you have remaining on the lease. If you do not have much time left on the lease, then it might not be in your best interest to spend every last dime to catch up on the delinquency, because the landlord can always refuse to renew the lease and proceed with eviction even if the rent current. The following are strategies to accomplish this goal:

1. Negotiate directly with the Landlord for additional time. The more money you have to put down and the sooner you can catch up on the rent, the more likely an agreement can be reached. However, make sure you get the agreement in writing, because there have been many stories reported where the Landlord made a verbal agreement not to proceed with the eviction and accepted partial payment, but then continued with the eviction anyway.
2. Filing a Chapter 7 or 13 bankruptcy case to immediately stop the eviction and resume normal payments after filing. The bankruptcy will allow the individual to cure the lease arrears before filing by making monthly bankruptcy payments. Most bankruptcy law firms offer free consultations. Allmand Law Firm offers free virtual consultations and filings across the state of Texas.

Second, if your goal is to get additional time to determine whether you will need to move out, then you can do the following:

1. Negotiate with the Landlord for additional time, but be sure to get it in writing.
2. If an eviction notice has already been served, you can contest the eviction by filing a response, raising a statutory defense, and requesting discovery to verify compliance with Cares Act.  Also, if an eviction order has already been entered, you can file an appeal of the order, which can buy you and your family additional time in the property while the appeal is heard.
3. If an eviction notice hasn’t been served, filing Chapter 7 or 13 bankruptcy will impose an automatic stay to prevent an eviction. Tenants can then reject the lease discharge, the lease arrears, and any additional unsecured debt. This strategy delays the evictions, grants you additional time in the property, and has the added benefits that accompany other bankruptcy filings: the ability to unload your burdensome credit card and other unsecured debt.

For the final option, even if you are willing to move out, then you should try to negotiate an agreement with your landlord commonly referred to as “Cash for Keys”. This is when the landlord will agree to make a nominal payment to the tenant to encourage them to move out, rather than going through the time and legal expense of filing for a formal eviction.  The process for filing evictions costs landlords time, money, and is generally a headache they would rather not deal with.  Done correctly, you can often negotiate with them by offering to save them the hassle and expense of filing an eviction notice by simply giving you a small cash incentive that you will use to expedite your departure.
more info on Cash-For-Keys arrangements: www.rentprep.com/evictions/cash-for-keys

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The post How should you negotiate with a landlord when facing evictions? appeared first on Allmand Law Firm, PLLC.

As many readers of our blog and emails, Congress passed a new bankruptcy law known as Subchapter V. Information about that law can be found at our blog shenwick.blogspot.com. https://shenwick.blogspot.com/2020/06/how-subchapter-v-could-save-your-small.htmlNew Subchapter V is similar to chapter 13 of the bankruptcy code but it can only be used by a business, not an individual.Some creative uses of Subchapter V are  to discharge repayment of a PPP loan, to reject a commercial lease which a tenant no longer wants to occupy, or to reject unfavorable agreements.    Subchapter V became effective on February 19, 2020 and several decisions have been announced by various bankruptcy courts which are favorable to Debtors. First, if a company filed bankruptcy under Chapter 11 can they convert their case to a case under Subchapter V? Yes. In re Progressive Solutions, Inc., No. 8:18-bk-14277-SC, 2020 WL 975464, at *5 (Bankr. C.D. Cal. February 21, 2020) (small business designated Chapter 11 debtor could retroactively proceed under Subchapter V after the case had been pending approximately 15 months).
-In re Glass Contractors, Inc., No. 20-40185 (Bankr. E.D. Tex. February 25, 2020) (small business designated Chapter 11 debtor could retroactively proceed under Subchapter V after the case had been pending approximately 1 month).-In re Body Transit, Inc., 613 B.R. 400 (Bankr. E.D. Pa. March 24, 2020) (small business designated Chapter 11 debtor could retroactively proceed under Subchapter V when the case had been pending 48 days).Second, can a debtor file under Subchapter V, if the debtor is not currently engaged in business? Yes, if a majority of its debt was business debt. -In re Wright, No. 20-01035-HB, 2020 WL 2193240, at *3 (Bankr. D.S.C. April 27, 2020) (debtor who was not currently engaged in business operations qualified as “small business debtor” where 56% of its debt amounted to residual business debt).Third, does a Subchapter 5 Bankruptcy Trustee have the automatic right to retain counsel? No. -In re Penland Heating and Air Conditioning, Inc., No. 20-01795-5-DMW, 2020 WL 3124585, at *_ (Bankr. E.D.N.C. June 11, 2020) (Bankruptcy Petition #: 20-01795-5-DMW) (denying Subchapter V trustee’s application to retain counsel, which was filed as a matter of course, because the need for legal representation had not arisen). A Subchapter V trustee may not retain legal counsel automatically like a bankruptcy trustee can do in a Chapter 7 case.

Clients, accountants or lawyers who have questions regarding Subchapter V should contact Jim Shenwick at 212 541 6224  or [email protected]

This article originally appeared in the New York Times on August 3, 2020https://www.nytimes.com/2020/08/03/nyregion/nyc-small-businesses-closing...
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One-Third of New York’s Small Businesses May Be Gone ForeverSmall-business owners said they have exhausted federal and local assistance and see no end in sight after months of sharp revenue drops. Now, many are closing their shops and restaurants for good.

William Garfield, the owner of Glady’s, a Caribbean restaurant in Brooklyn, said he decided to close after his landlord told him he would need to start paying his full monthly rent.
William Garfield, the owner of Glady’s, a Caribbean restaurant in Brooklyn, said he decided to close after his landlord told him he would need to start paying his full monthly rent.

In early March, Glady’s, a Caribbean restaurant in Brooklyn, was bringing in about $35,000 a week in revenue. The Bank Street Bookstore, a 50-year-old children’s shop in Manhattan, was preparing for busy spring and summer shopping seasons. And Busy Bodies, a play space for children in Brooklyn, had just wrapped up months of packed classes with long waiting lists.

Five months later, those once prosperous businesses have evaporated. Glady’s and Busy Bodies are closed for good and Bank Street, one of the city’s last children’s bookstores, will shut down permanently in August.

The three are victims of the economic destruction that threatens to derail New York City’s recovery from the financial collapse triggered by the coronavirus pandemic.

An expanding universe of distinctive small businesses — from coffee shops to dry cleaners to hardware stores — that give New York’s neighborhoods their unique personalities and are key to the city’s economy are starting to topple.

More than 2,800 businesses in New York City have permanently closed since March 1, according to data from Yelp, the business listing and review site, a higher number than in any other large American city.

About half the closings have been in Manhattan, where office buildings have been hollowed out, its wealthier residents have left for second homes and tourists have stayed away.

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When the pandemic eventually subsides, roughly one-third of the city’s 240,000 small businesses may never reopen, according to a report by the Partnership for New York City, an influential business group. So far, those businesses have shed 520,000 jobs.

While New York is home to more Fortune 500 headquarters than any city in the country, small businesses are the city’s backbone. They represent roughly 98 percent of the employers in the city and provide jobs to more than 3 million people, which is about half of its work force, according to the city.

When New York’s economic lockdown started in March the hope was that the closing of businesses would be temporary and many could weather the financial blow.

But the devastation to small businesses has become both widespread and permanent as the economy reopens at a slow pace. Emergency federal aid has failed to provide enough of a cushion, people remain leery of resuming normal lives and the threat of a second wave of the virus looms.

The first to fall were businesses, especially retail shops, that depended on New York City’s massive flow of commuters. And months into the crisis, established businesses that once seemed invincible, including some that had ambitious expansion plans, are cratering under a sustained collapse in consumer spending.

One business that will not reopen is Bank Street Bookstore, a nonprofit on the Upper West Side run by the Bank Street College of Education. More than 90 percent of its revenue was in-store sales, mostly to neighborhood parents, the college’s students and elementary schoolteachers.

“We had to keep reinventing the business every week to two weeks, based on new guidelines,” Caitlyn Morrissey, the store’s manager, said about the past months. “Our cornerstone was in-person sales, not web sales.”

Image“Our cornerstone was in-person sales, not web sales,” said Caitlyn Morrissey, the manager of Bank Street Bookstore, a children’s book shop that is closing for good.
“Our cornerstone was in-person sales, not web sales,” said Caitlyn Morrissey, the manager of Bank Street Bookstore, a children’s book shop that is closing for good. Credit...Amr Alfiky/The New York Times
Unlike larger firms, small businesses — bookstores, bodegas, bars, dental practices, gyms and day care centers — typically do not have the financial resources to overcome a few rough days or weeks, let alone months.

There is no clearinghouse for reliable data on the number of small businesses that have closed in New York or nationwide. The actual number of permanent closings in New York is probably higher than Yelp’s tally since it largely focuses on consumer-facing businesses. A small business is generally defined by economists as those with under 500 employees.

From March 1 to the end of April, during the height of the pandemic in New York City, businesses in the city that use the payment company Square saw their revenues drop by half, according to an analysis the company provided to The New York Times. The most significant revenue declines were in the Bronx and Manhattan, the company said.

As part of a $2.2 trillion emergency aid package adopted in March, the federal government set aside about $500 billion in small-business loans to keep workers employed and companies afloat. But business owners said they have spent all or most of their loans, paying salaries and bills, including rent.

More help for small businesses is part of negotiations as the Trump administration and Republicans and Democrats in Congress try to iron out another rescue package.

While the worst of the pandemic in the United States struck New York City first, small businesses across the country have been clobbered.

Between early March and early May, roughly 110,000 small businesses nationwide shut down, according to researchers at Harvard.

In New York, the restaurant and hospitality industry has been one of the hardest hit. More than 80 percent of the city’s restaurants and bars did not pay full rent in June, according to the NYC Hospitality Alliance.

Among those restaurants was Glady’s in Brooklyn. Its revenue plummeted by two-thirds since March, to about $12,000 per week in June. The majority of its sales were from tropical rum drinks served through a side window of the restaurant.

The owner, William Garfield, said he decided to close in June before officials started allowing outdoor dining after his landlord said he had to start paying the full monthly rent, $8,000, starting in July. Mr. Garfield said the healthy revenue from drink sales was still not enough to make ends meet.

“We were thriving,” said Mr. Garfield, 32, said about Glady’s business before March. “I would disagree with the sentiment that if someone had a thriving business they should be able to survive this.”

Mr. Garfield has another restaurant, Mo’s Original, and a bar next door, both of which he plans to keep open. His staff among his businesses has shrunk from 56 to seven.

He has spent almost all of his small-business stimulus loan, known as Payroll Protection Assistance, about $72,000. His insurance company denied his business interruption claim, citing New York State’s order that restaurants were “essential businesses” and could stay open.

“It’s the most frustrating situation because it’s not about passion anymore or the work you put in or the hours you put in,” he said. “It’s all about the mitigating circumstances that are out of your control.”

In recent weeks, “For Lease” signs have started to appear on storefronts on streets throughout New York, evidence that businesses that tried to ride out the initial months or abruptly shift to new online business models could no longer survive.

Business owners said they are at a tipping point. They have exhausted their federal, state and local aid. And while some landlords have offered breaks on rent, some business owners say others have been less flexible.

Owners say they also have to cope with constant uncertainty — not just the threat of a resurgence of the virus but also having navigate shifting reopening plans.

Restaurants in New York City were expecting to restart indoor dining in July. Owners bought food and supplies for what they thought would be larger crowds. But days before the restrictions were to be lifted, officials halted the plans, citing rising cases in other states that had allowed indoor dining.

Nearly a third of the 2,800 businesses in New York City that have permanently closed were restaurants, according to Yelp.

The remaining businesses represent a broad swath of the city’s economy, including small law firms, beauty stores, spas and cleaning companies.

“As a small-business owner, I’m surprised that more businesses have not closed yet,” said Andrea Dillon, the owner of Busy Bodies, a day care she opened on Fulton Avenue in Brooklyn in 2016.

Ms. Dillon said she noticed the ripple effect of the pandemic in late February, a few weeks before the city shut down. Parents and caregivers were canceling upcoming birthday parties and classes.

By early March, she realized that her entire business model — in which up to 70 children and adults cram into a play space with toys and live music — could not coexist with the coronavirus.

She asked her landlord for a break on her $6,000 a month rent, but he refused. Ms. Dillon said she decided in early April to close down.

“The face of New York City storefronts, they will not be forever changed,” she said. “But they will be changed for the foreseeable future.”

While her management company did not offer a break on rent, another landlord, Brian Steinwurtzel, said he was doing just that for some of his roughly 2,000 tenants in New York City, many of them small businesses. Mr. Steinwurtzel, the co-chief executive at GFP Real Estate, said he helped them apply for federal assistance and lowered their rents while business is down.

“It doesn’t make any sense to kick them out or fight with them as long as we are all working together,” Mr. Steinwurtzel said. “We believe we are all in it together, and we all have to help each other out.”

The most vulnerable small businesses in New York City might be those operated by minority or female owners. Recent studies have shown that these were largely shut out of federal aid. There are about 10,500 business that New York City has certified as minority- or female-owned.

A survey of such businesses released by the New York City Comptroller’s Office found that 30 percent of them believed they were likely to fold within the next 30 days.

Among those businesses is ThroughMyKitchen, a catering and snack company owned by Evelyn Echevarria. Before March, she derived most of her income from selling goods at street fairs and catering. Her last event was in March, catering a 120-person wedding in South Carolina.

She is surviving on unemployment benefits, but the largest portion of that, the federal stimulus of $600 per week, expired at the end of July. She also received $2,000 in assistance from the city.

“It’s been very, very hard,” Ms. Echevarria, 58, said. “The small businesses won’t be able to survive this. This, to me and many others, is devastating. It’s devastating.”

Sheelagh McNeill contributed research.

Once a Chapter 7 debtor receives a discharge of personal debts, creditors are enjoined from taking action to collect, recover, or offset such debts. However, unlike personal debts, liens held by secured creditors “ride through” bankruptcy. The underlying debt secured by the lien may be extinguished, but as long as the lien is valid it survives the bankruptcy. Read More ›
Tags: 6th Circuit Court of Appeals, Chapter 7