COVID-19 Bankruptcy Facts and Myths
Throughout our 9 months of dealing with the coronavirus, there have been misinformation and rumors in all aspects of life. It is hard to tell what is indeed a fact or not. In my world, I have seen several COVID-19 Bankruptcy Facts and Myths. This blog is to set the record straight.
Myth – The Closures of Bankruptcy Courts Have Caused Mass Delays
The Bankruptcy court and our case trustees have done an amazing job keeping our dockets moving throughout the entire pandemic. Within days of the shutdown, there was a standing order allowing most matters to proceed by video or phone conference. The Court made accommodations for attorneys and their clients to attend hearings through video conferences. Therefore, no one had to even be in the same room to conduct “business as usual” in a bankruptcy case. Our court even scheduled several “brown bag happy hour” sessions where the court updated us on changes in procedure. Honestly, the Bankruptcy court stepped up like you would not believe. We did not miss a beat. Cases have not been lagging at all, and I have seen no delay in the administration of New Jersey bankruptcy cases.
Myth – COVID-19 Has Caused an Increase in Personal Bankruptcy Filings
Initially anticipated bankruptcy trends are actually quite different than reality. The bankruptcy bar initially anticipated that there would be a deluge of consumer bankruptcy cases. And honestly, I started looking into training outsourced staff to be ready for the increase in bankruptcy filings. Instead, with the massive, Herculean efforts on the part of the federal and state government to keep people afloat we have actually seen a sharp decline in consumer bankruptcy filings over the past 5 months. Between stimulus funds, the moratorium on evictions and mortgage foreclosures, SBA loan forgiveness and payroll protection, just to name a few, people have been staying afloat far better than we had expected.
Fact – COVID-19 Hit Small Businesses Hard
The coronavirus hit small businesses the hardest. We have had many inquiries about small business bankruptcy filings. So far, business owners are still trying to keep things afloat. Many are waiting to see if things get bad enough that they need to shut down and file personal bankruptcy. There’s just so many moving parts with a small business bankruptcy case. But, between commercial landlords and mortgages not having any obligation to forebear and there being no moratorium on commercial evictions, small businesses that have been shut down and they’re trying to re-open slowly are getting crushed.
Even so, from a bankruptcy perspective, often times I find myself just advising the owner to shut down the business, give back the keys, file a certificate of dissolution and walk away. Often we find there’s just no real reason to file a small business bankruptcy unless there’s a way to save the business or the owner has a lot of personal guarantees, in which case it may make sense to file a small business chapter 11 case to re-organize the debt.
Myth & Fact – People are Banned from Attending Bankruptcy Proceedings
Under ordinary circumstances, anyone interested in a specific case, like Pier One’s Chapter 11, can attend bankruptcy proceedings. These days, although there are exceptions for certain very limited proceedings where people are appearing in court, almost nobody is allowed to appear in person. So, certainly until courts are completely reopened, nobody should go to the courthouse in person and attempt to attend a bankruptcy proceeding.
Again, the above is meant to provide some clarity regarding COVID-19 Bankruptcy Facts and Myths. Please call me if you need further clarification or have other bankruptcy law questions.