GibsonLaw Group - April 2020

Bankruptcy in the Wake of COVID-19 APRIL 2020 GIBSONLAWGROUP.COM (817) 769-4044 DIVING DOWN WITH GLG

This is not the article I wanted to write this month. The original article was about the referrals we make to help our clients grow their networks and grow their businesses. Given that we now live in a world of social distancing and voluntary quarantines, where people bump elbows instead of shake hands, that strikes me as sadly ironic. I feel compelled to write this month about bankruptcy, which became a big part of our business when the world fell apart in 2008. I fear it may become a big part of our business again as COVID-19 wreaks havoc on businesses across the country. Although I pray that I am wrong, I fear that the pandemic’s effect on our economy will last much longer than it will on our health. Though if your health or the health of someone close to you is affected directly, you are, of course, in all our hearts. Today is March 19, the day our governor declared a statewide emergency, closing all Texas schools, bars, dine-in restaurants, and gyms. By the time this newsletter appears in your mailboxes, these businesses may be back open, and the worst may be behind us. If not, or if we are still in the thick of it, you may be wondering if business or personal bankruptcy is an option. If so, I want to share some hopefully good advice from having held a lot of clients’ hands through the last collapse. Bankruptcy should be a last resort, but it can be an economic lifesaver. collectively represent two different paths to recovery. Chapter 7 involves “liquidation.”This is what you file personally when you’re at the end of your financial rope. Your nonexempt assets are gathered up by a court- appointed trustee and sold, and your creditors are paid pennies on the dollar. You are “discharged,” and your now former creditors must leave you alone. You get to keep your house, your car, your pension, and most of your personal property. You have to part with your boat, your lake house, your rental property, and your weekend hooptie. Chapter 7 is a great option when your personal debts send your mind to dark places and keep you awake at night. Chapters 11 and 13 allow“reorganizations.” Chapter 11 is what businesses file; Chapter 13 is what people normally file. In a reorganization, we put together a “plan of reorganization” and submit it to the court for approval. Your creditors get to vote, but not all equally. The process is pretty complicated, but the goal is to literally reorganize your debts and force You’ve no doubt heard of Chapter 7, 11, or 13, which just refer to chapters of the U.S. Bankruptcy Code. As a practical matter, they

your creditors to take less and be paid out over time. Property taxes, for example, are typically paid out over five years. Reorganization is what you file when you think you can save your business, or have personal assets that you do not want to lose, and have enough income to repay most of your debts over time. Obviously, there is a lot more to bankruptcy than what I have written about here, but it is a very real option for tens of thousands of people. Last year alone, 752,160 Americans filed for personal bankruptcy protection. The good news is that people survive bankruptcy, and most come out stronger. Bankruptcy really can offer a fresh start, and the stigma is not what it used to be, especially since 2008. Regardless of what happens with the pandemic, if you, your business, a family member, or a friend are at the end of the financial rope, please reach out. We do not charge for the initial consultation and would be honored to help you navigate an uncertain financial future.

–David Gibson

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