Wednesday, October 28, 2020

Record number of small-business bankruptcy filings signal COVID-19 distress

Originally appeared on Mississippi Business Journal

A record number of small businesses based in Mississippi filed for protection under Chapter 11 of the U.S. Bankruptcy Code during the second quarter of 2020.

That, of course, was when the coronavirus pandemic struck and the first lockdowns and restrictions were put into place across the nation.

Chapter 11 allows businesses to reorganize while reaching an acceptable payout to creditors.

There were 29 such filings in the second quarter, compared with six in the year-earlier period, according to U.S. bankruptcy data.

Such businesses received a stroke of legislative luck when President Trump signed a bipartisan bill that became known as the Small Business Reorganization Act in August 2019, well before the coronavirus struck in March.

Bankruptcy grunge red stamp

 The act contains Subchapter V, which was subsequently amended by Congress to increase the maximum debt to $7.5 million, up from $2.75 million for one year, till March 27, 2021 under the CARES (Coronavirus Aid, Relief and Economic Security) Act to benefit debtors, as well as creditors.

The number of cases in Mississippi are not big, but they belie a much broader toll on smaller businesses.

Dawn Starnes, director of the National Federation of Independent Business in Mississippi, said that “most of our businesses” are family owned and don't file for bankruptcy protection – they just close.

Ten or fewer employees is typical of membership, she said.

The smallest of businesses keep a tight rein on their balance sheet and manage their inventory closely, though “a lot of folks are just hanging on,” Starnes said in an interview.

Thus far, in the lower end of the business community there has not been a noticeable rise in bankruptcies, Starnes said.

The Payroll Protection Program, which granted qualified applicants $605 a week but which expired in early August, was a major help, she said.

Efforts to renew the program are being pursued, she said, but action looks doubtful till after the presidential election, she said.

Two-thirds of NFIB members file their taxes as individuals, she said.

In 2020, 97 percent are privately owned and comprise 47 percent of the private work force.

Most of the NFIB members in Mississippi have fewer that 50 employees, she said.

One of those small companies that has filed is Quality Welding and Fabrication Inc. in Columbia.

At it peak, Quality Welding and Fabrication had 125 employees.

That's before crude oil and natural gas prices dropped dramatically and demand for the company's tanks accordingly, said owner Kenny Breakfield.

The viral epidemic-induced slowdown in the economy curtailed production of crude oil in Mississippi by 50 percent, compared with a year earlier, according to Dr. Sondra Collins, senior economist for the state Institutions of Higher Learning.

Brooklyn Roasting Company files for bankruptcy, will close shops 

Originally appeared on New York Post

Brooklyn Roasting Company files for bankruptcy, will close shops 

The pandemic has hit another beloved Big Apple hot spot.

Brooklyn Roasting Company, known for its colorful logo and flavorful coffee, filed for bankruptcy protection on Thursday and said it’s planning to permanently close its remaining retail locations at 50 W. 23rd St. and at 25 Jay St. in Dumbo Brooklyn, according to its Brooklyn bankruptcy court documents.

It will keep three other Brooklyn locations open, including at 200 Flushing Ave. and 45 Washington Ave., a spokesman said.

The company is also hoping to save its wholesale business, however, which sells to New York institutions like Columbia University and Goldman Sachs as well as the airports.

Founded in 2009 by Jim Munson, a former partner in The Brooklyn Brewery, BRC became a beloved New York brand with as many as seven locations across the city at its peak.

But its problems began before the pandemic as the company over-expanded in an effort to be acquired, according to the filing.

The coffee roaster had been in discussions in 2018 to be acquired for $22 million by an investment group including the former chief executive of Dunkin’ Donuts, the filing states. At the behest of its investors, BRC invested in new real estate and staff, but the acquisition never happened.

By the beginning of 2019, “BRC’s financial condition was poor,” and revenues declined for the first time in 2018 to $9.7 million, according to the filing.

Just as the company was getting its footing back — with revenues climbing to $10.3 million in 2019 — the pandemic wiped out more than half of the company’s retail sales. It’s wholesale business was also decimated.

It reported an “extraordinary COVID expense” year to date without providing details about the debt.

BRC received a $727,000 in federal stimulus loans, but the money ran out in August even as its sales remained “severely depressed,” according to the filing. Munson controls 13 percent of the company, the filing said.

“This was a one two punch,” said distressed asset expert Adam Stein-Sapir. “They had a failed acquisition and all the additional costs they signed up for in anticipation of that and then Covid.”

Wednesday, October 21, 2020

City Council set to vote on new office to regulate NYC taxi medallion sales

Originally appeared on NY Daily News

New York City Council members hope a new office within the Taxi and Limousine Commission will keep taxi medallion owners from being taken for a ride.

The Council on Thursday will vote on a bill to establish a new “Office of Financial Stability” within the TLC designed to keep tabs on the health of the city’s crumbling yellow cab industry. 

Bronx Councilman Ritchie Torres, the bill’s sponsor, said he wanted to prevent a repeat of history when the city sold medallions or approved medallion sales at prices of $1 million and more.

Councilman Ritchie Torres (D-Bronx). 

The new office would give the TLC a “statutory obligation to oversee and regulate the financial stability of the medallion market,” Torres said.

Medallions give yellow cabs the exclusive right to street hails in most of the city — but their value began to plummet in 2012 when Uber and other e-hail companies arrived in New York.

Many medallion owners took out home loans or refinanced against their medallions — and are now drowning in insurmountable debt. The COVID-19 pandemic made things even worse, causing yellow cab ridership to fall by 92% in June from the same month of 2019.

FILE- In this Jan. 29 photo, a taxi medallion is displayed on the hood of a cab, in New York. 

The Office of Financial Stability — which would open in November 2021 — won’t necessarily help cabbies who are now underwater, but it should prevent others from a similar fate, Torres said.

“We cannot afford to have the TLC auction off medallions at speculative prices,” said Torres. “We cannot allow the TLC to approve medallion transfers with speculative loans.”

With the majority of ride hails in New York being taken by Uber and Lyft, it’s unclear if the medallion values will ever rebound to sky-high levels.

But Torres — the Democratic nominee for New York’s 15th Congressional district in the Bronx — said he was concerned by the “growing presence of private equity" in the medallion market, including MarbleGate, a Connecticut-based firm with roughly 4,000 New York taxi medallion loans in its portfolio.

“I do not take for granted that there could never be a medallion bubble again,” said Torres. “I hope for the best but I prepare for the worst.”




Thursday, October 08, 2020

Why filing for Chapter 11 bankruptcy could be the best way to save your small business

Originally appeared on Baltimore Business Journal

Filing for bankruptcy protection may seem taboo to small business owners, but a relatively new and little-known program could prove to be the difference between surviving the Covid-19 pandemic or closing for good.

The flood of bankruptcies that many economists, lawyers and accountants expected has not transpired. While several large companies in the retail industry have filed for Chapter 11 bankruptcy — J.C. Penney, Neiman Marcus and Brooks Brothers to name a few — most small businesses have held off as they try to tread water.

Small businesses have typically not filed Chapter 11 bankruptcy because the reorganization process associated with doing so tends to be costly and take a lot of time. If businesses don't have enough cash for reorganization, creditors will push them to liquidate.

However, for many small businesses the clock is getting closer to striking midnight as the federal stimulus money dries up and the coronavirus pandemic continues to persist. Despite what President Donald Trump says, medical experts don't expect a vaccine to be widely available until 2021.

A law passed by Congress last year that went into effect in February provides small businesses with a lifeline: a new section of Chapter 11 known as Subchapter V, which involves a more timely and less costly reorganization process.

Subchapter V was created to provide an option for businesses with $2.7 million or less in debt. It prevents creditors from proceeding with collections, guarantees a reorganization plan is filed within 90 days and waives quarterly bankruptcy trustee fees. Congress raised the debt limit to $7.5 million when it passed its coronavirus relief package, known as the CARES Act, in March.

"It was pure luck that we have such a useful tool that came out right when this [pandemic] happened," said Vadim Ronzhes, a tax consultant at Rosen, Sapperstein & Friedlander in Towson.

Accountants and attorneys have traditionally recommend against filing for Chapter 11 in the past because of how difficult it can be to get a reorganization plan approved, Ronzhes said. With Subchapter V it's a much easier and quicker process, he said.

During the proceedings, a business may continue to pay expenses such as employees wages and benefits while it develops a plan for paying off creditors, Ronzhes said.

"The whole goal is to make sure that the business is operational and that you're able to continue supporting the community that you're operating in and make sure your employees are getting paid," Ronzhes said. "That is definitely one of the biggest benefits."

Another benefit is that the company can bring on new investors or owners. In the current operating environment with all-time low interest rates, Ronzhes said outside investors are looking to provide debt or investment capital.

Perhaps most important, Ronzhes said, is that the Subchapter V process brings all creditors to the table to come up with a plan for paying off debt. Everyone does not have to approve of the plan, but at least all parties will have been a part of the conversation, he said.

During the pandemic many small business owners have complained about the challenges of working with landlords who are unwilling to rework leases. The Subchapter V process can force those landlords to come to the table while allowing the business to remain operational instead of being forced to close.

There are downsides to filing for bankruptcy though. For one, it will negatively impact credit ratings. Filing for bankruptcy also carries a negative stigma. But in the current economic situation brought on by the pandemic, Ronzhes said the good more than likely outweighs the bad.

"If you have multiple debtors and one person decides to file suit and take money out of your bank account through levies, that could end an organization," Ronzhes said. "As soon as you start paying employees, they're not showing up. This is a way to reorganize and I think it's going to be used a lot by businesses to give themselves breathing room."

One industry that won't be helped is real estate, Ronzhes said. Real estate firms are usually structured by having separate limited liability companies for individual properties. Those LLCs won't be able to file for Subchapter V protection because the overall organization may still be profitable.

Tuesday, October 06, 2020


As many readers of our blog and emails know,  at Shenwick & Associates we are helping many commercial tenants vacate their leases prior to the  expiration of their lease, due to the virus and other economic factors. See and

 "Commercial leases in New York City, COVID-19, Recent Protests and a Strategy to End or Terminate Commercial Leases", dated SUNDAY, JULY 12, 2020 can be found at

A law was recently passed in NYC which limits the liability of individuals who have guaranteed leases with certain restrictions (that law Int. 1932-A, which is discussed below and which many people including attorneys and lawyers are not aware) can limit a guarantors exposure if a lease is terminated.

The Wall Street Journal reports that only 10% of workers have returned to their office in NYC and with so many workers working remotely, many businesses would like to terminate or  exit their leases and or vacate their space prior to the expiration date of the lease to save on the cost of rent.

 In fact, office rent and the cost of commuting are significant business expenses that many businesses would like to reduce or eliminate.

Additionally, many experts predict that many workers may never return to New York or other cities due to technological advances like Zoom, Google Meet, crime, the diminishing quality of life in New York, the cost, aggravation and time spent commuting and the other benefits of not having to commute, such as more family and leisure time.

At Shenwick & Associates,  we have helped many tenants vacate their lease and space  using a multi pronged strategy consisting of:   1. review of the commercial lease to determine if the Landlord has breached any terms of the Lease, 2.   review of the guarantee or good guy guarantee signed by the   principle of the business, 3.  aggressive negotiations with the landlord and 4.  threatening or filing a bankruptcy petition, including new sub chapter 5 of chapter 11 of the bankruptcy code, to reject the lease in bankruptcy or to close the business.

Many clients are interested in retaining our  services, but they are concerned about the impact of the  guarantee or the good guy guarantee, if the commercial tenant vacates the space early or terminates the lease prior to its expiration.


There are two types of guarantees in leases: a regular guarantee and a good guy guarantee. 

Good guy guarantees are more common in leases  than regular guarantees in leases. 

Having reviewed many office guarantees, we note that many guarantees have a limited life, meaning that the guarantee expires on its own terms during the term of the lease or converts to a good guy guaranty, after a period of time.

A good guy guarantee generally provides that the guarantors liability for rent or additional rent terminate when 1. the tenant gives proper notice (pursuant to the terms of the Lease or the good guy guaranty) that the tenant will vacate the space (generally 90 days), 2. The tenant does in fact vacate the space and is current on the payment of rent or additional rent when it vacates and 3. The premises are left “broome clean”. Provided that these and other conditions are met, the guarantors liability ceases, however the tenant remains liable for rent and additional rent until the lease expires.

 Oftentimes if we can show a landlord that the tenant is out of business, closing its business,  losing money or has few assets, the landlord may be amenable to allowing the tenant to vacate the space early, pursuant to a negotiated lease surrender agreement.

If the landlord resists, we will draft a bankruptcy petition and send it to the landlord indicating that if the parties cannot reach an agreement then the tenant will file for bankruptcy and the landlord will lose rent, and incur significant legal fees for landlord tenant and bankruptcy attorneys.

Additionally, there is a New York City law that can aid a tenant who wants to vacate a space with respect to money that may be owed by the guarantor., which law prohibits the enforcement of personal liability provisions in certain commercial leases

Int. 1932-A prohibits landlords under certain commercial leases from enforcing guarantees in their leases if the guarantors  are “natural persons,”  (it may not apply if the guarantor is an  LLC or corporations), provided that the default occurred between March 7, 2020 and September 30, 2020, and that the tenant was impacted by the stay at home orders implemented by the Governor’s office in one of the following ways: 

1. the tenant was required to cease serving food or beverages for on-premises consumption or to cease operation under Executive Order 202.3 issued by the Governor on March 16, 2020; 

2. the tenant was a non-essential retail establishment subject to in-person limitations under guidance issued by the New York State Department of Economic Development pursuant to Executive Order 202.6 issued by the Governor on March 18, 2020; or 

3. the tenant was required to close to members of the public under Executive Order 202.7 issued by the Governor on March 19, 2020 (i.e. barbershops, hair salons, tattoo or piercing parlors, nail technicians, cosmetologists, estheticians and the provision of electrolysis, laser hair removal services and related personal care services).

The law also provides that if a landlord  attempts to enforce a guaranty that the landlord knows or reasonably knows  is not enforceable, that would be  commercial tenant harassment that is prohibited under Subdivision a of section 22-902 of the Administrative Code of the City of New York

The facts of each case need to be reviewed to determine if Int. 1932-A applies, however at Shenwick & Associates we have found that many tenants meet the requirements of the law based on the fact that the tenant was a non-essential retail establishment and therefore their guarantor liability was voided.

Clients that are interested in terminating their lease or existing their lease early should contact Jim Shenwick 212 541 6224.  


New York Region Sees 40% Bankruptcy Surge, Braces for More

 Originally appeared on Bloomberg

Almost 6,000 city businesses have closed. Recovery hinges on office workers’ return

The pandemic has battered New York City businesses, with almost 6,000 closures, a jump of about 40% in bankruptcy filings across the region and shuttered storefronts in the business districts of all five boroughs.

It’s going to get worse.

This fall, the nation’s largest city will see even more padlocked doors as companies burn through federal and private loans they tapped in March, landlords boot businesses that can’t make rent, and plummeting temperatures chill outdoor dining and shopping.

“By late fall, there will be an avalanche of bankruptcies,” said Al Togut, a lawyer who has handled insolvencies for small businesses and huge corporations like Enron. “When the cold weather comes, that’s when we’ll start to see a surge in bankruptcies in New York City.”

New York City and its businesses have reached a pivotal point. After over six months with the specter of Covid-19 hovering in every subway car and corner bodega, the virus is showing signs of resurgence.

The state of New York on Saturday reported more than 1,000 new cases for the first time since early June. Spikes emerged in south Brooklyn and Queens neighborhoods with large Orthodox Jewish communities, just as they observed Yom Kippur. Meanwhile, principals called on the state to take over schools days before they restart in-person classes, saying Mayor Bill de Blasio failed to ensure enough staff to open safely.

relates to New York Region Sees 40% Bankruptcy Surge, Braces for More

 Pedestrians pass by a closed storefront on Madison Avenue.

The coming wave of business closings will touch every New Yorker as jobs get scarcer, neighborhoods lose beloved shops and families run out of cash.

Already, dwindling tax revenue has led to cutbacks in municipal services. Trash on sidewalks, unkempt parks and an increase in shootings have made it more difficult to persuade workers to return to offices, more than 150 executives told the mayor in a letter this month. A dearth of office workers is a death knell for many merchants.

“It’s a crisis, and we need to act—our economy can’t recover without saving small businesses,” said city Comptroller Scott Stringer, a candidate in next year’s mayoral election. “When they close, we don’t just lose our beloved Main Street businesses. We lose jobs, tax revenue and the economic backbone of our city.”

The pandemic could permanently close as many as a third of New York’s 230,000 businesses, according to the Partnership for New York City, a business group.

Bankruptcy filings in the region have skyrocketed since the middle of March, when the state of New York reported its first deaths from Covid-19 and Governor Andrew Cuomo closed all nonessential businesses. There were 610 filings in the Southern and Eastern Districts of New York from March 16 to Sept. 27, according to court records. That’s a 40 percent jump from the same period in 2019 and the most by far for any year since the financial crisis. The districts include some nearby counties.

Almost 6,000 New York City businesses closed from March 1 to Sept. 11, according to Yelp, the website of user reviews. Over 4,000 of those closed permanently.

The carnage has been demoralizing after decades in which the city fought back from the brink of bankruptcy, the scourges of crack cocaine and violent crime, terrorist attacks and recession. The pandemic hit as the city had achieved record high employment and low crime.

relates to New York Region Sees 40% Bankruptcy Surge, Braces for More

 Diners eat outside a French restaurant in front of a storefront for lease.

Prosperity expressed itself in bustling department stores from Bergdorf’s to Macy’s. Neighborhoods flourished with artisanal food and clothing boutiques, mom and pop stores, and coffee shops that gave New Yorkers a place to feel at home outside their tiny apartments.

The nation’s business capital has always rebounded from past crises, but the advent of work-from-home in an economy increasingly dependent on white-collar jobs may be an insurmountable challenge.

Distress is on display on Madison Avenue, once a global destination bustling with glamorous shoppers. From 60th Street to 70th Street today, about 60 of the 130 storefronts are closed and locked. 

Padlocked doors and windows covered with butcher paper or plywood line a quiet boulevard. Even inside the luxury retailers that remain open, like Dolce & Gabbana and Prada, a handful of well-coiffed sales people and broad-shouldered security guards stand expectantly on sales floors empty of customers.

The owner of Jimmy’s Steak and Grill, a food cart on the corner of Madison and 60th, said that with nearby office buildings empty, sales of hot dogs and lamb-on-rice platters are down 60%.

“Right now, I’m supposed to have a line,” Jimmy Gonzalez said through a black mask, motioning mournfully to the empty sidewalk. Over half the food-cart owners he knows gave up. “They sell the cart, they sell the permit, they sell everything.”

Small businesses like Gonzalez’s show what’s at stake when big employers keep workers away from office towers. Manhattan businesses that use the digital payment system Square are earning only 62% of the revenue they earned pre-pandemic, according to the company.

relates to New York Region Sees 40% Bankruptcy Surge, Braces for More

 A padlock on the door of Carroll Gardens Classic Diner, a neighborhood restaurant now permanently closed after struggling during the pandemic.

“This is likely a result of a significant drop in the number of commuters coming into the borough,” according to Square economist Felipe Chacon.

By late September, just 15% of the city’s 1.2 million office workers had returned, according to the Partnership for New York City.

“Retail and real estate will continue to decline in New York until you can reignite the office traffic,” said Joseph Malfitano, who advised Brooks Brothers and the parent company of Ann Taylor in their bankruptcies this year.

Many New York City business owners who give up don’t even bother filing for bankruptcy, which can cost as much as $25,000, according to Leslie Berkoff, a longtime bankruptcy attorney. Owners just lock the doors and walk away.

“What’s the point of bankruptcy? Nobody’s going to chase you right now,” said Berkoff. “A lot of your vendors probably aren’t going to survive either.”

That’s what cheesemonger Patrick Watson, the owner of Stinky Bklyn in the Cobble Hill neighborhood, did when his landlord refused to renegotiate his rent. Watson quickly sold off his inventory of imported Brie and Humboldt Fog and donated the remaining staples —cans of tuna, crackers and condiments—to a homeless shelter.

“We tried. We really, really tried,” Watson wrote on Facebook in April. “For the safety of our crew and with no immediate end in sight, Sunday will be our last day.”

About 10 neighboring businesses also closed, including a diner, a bar and a hair salon, said Randy Peers, president of the Brooklyn Chamber of Commerce.

Sales remain brisk at Watson’s other business, a wineshop called Smith & Vine, possibly indicating heightened stress levels in the city.

In an effort to help restaurants, the city closed dozens of streets on weekends so they can take that space, and it’s going to continue the program into the winter, allowing propane heat lamps and tent-like enclosures.

“Once you hit below 60 degrees, it starts to get dicey,” said Vin McCann, a restaurant consultant. “I would bet you that between 25 and 50 percent of restaurants in New York City will not come back.”

Rent relief could be possible if the state allowed localities to forgive landlords’ property-tax payments in return for discounting rent owed to them, said City Councilman Mark Gjonaj, who heads the council’s small-business committee.

“This would help save struggling mom-and-pop shops while preventing landlords’ properties from going into distress,” he said.

The city’s Department of Small Business Services received about 35,000 calls for help since June and gave out about 4,000 grants and loans from an $80 million program approved early in the pandemic.

“A third of our small businesses could be closed if we don’t have a strong recovery,” said Jonnel Doris, the department’s commissioner. “The fate of small businesses will determine the fate of the city.”

relates to New York Region Sees 40% Bankruptcy Surge, Braces for More

 A “For Lease” sign hangs in the window of Stinky Bklyn.


Friday, October 02, 2020

Almost 90 percent of NYC bars and restaurants couldn’t pay August rent 

Originally appeared on New York Post

Nearly 90 percent of New York City bar and restaurant owners couldn't pay their rent in August, heightening the continued crush the coronavirus shutdown has inflicted on Gotham’s economy.

Patrons eat outdoors in NYC's Chinatown area.

Eighty-seven percent of bars, restaurants, nightclubs and event spaces in the five boroughs could not pay their full August rent, according to data from 457 businesses surveyed between Aug. 25 and Sept. 11, in a new study released Monday by the nonprofit NYC Hospitality Alliance.

It’s a 7 percentage-point increase from June and a four-point jump from July, darkening the dire picture for eateries desperately seeking relief following six months of partial — and in some cases total — closure due to COVID-19 shutdowns.

Some 34 percent of this group said they could not pay rent at all last month, and only 12.9 percent were able to meet full payments.

“Restaurants, bars and nightlife venues have been financially devastated by the COVID-19 pandemic,” said alliance executive director Andrew Rigie.

“Even before the pandemic when operating at 100 percent occupancy, these small businesses were struggling to stay open. Now we’re seeing widespread closures, approximately 150,000 industry workers are still out of their jobs, and the overwhelming majority of these remaining small businesses cannot afford to pay rent.

“The hospitality industry is essential to New York’s economic and social fabric, and to ensure the survival of these vital small businesses and jobs, we urgently need rent relief, an indefinite extension of outdoor dining, a roadmap for expanded indoor dining, covered business interruption insurance and immediate passage of the Restaurants Act by Congress,” he added.

When asked if landlords were waiving rent in relation to COVID-19 hardships, just 40 percent of businesses responded in the affirmative — 28.5 percent said less than 50 percent of their rental obligations were waived in August, 43 percent said 50 percent and 28.5 percent said they were given a break on more than 50 percent of their rental fees.

Meanwhile, 90 percent reported they have been trying to negotiate their leases, but their landlords wouldn’t budge.

The study also comes ahead of the long-awaited partial reopening of New York City’s indoor dining slated for Sept. 30 at 25 percent capacity.

New York City will be the last region in the state — and also a month behind neighboring New Jersey — to get the green light for the practice, despite a majority of the Empire State’s 57 counties outside the five boroughs being approved for the practice since June.

“I’m not really surprised because the industry is devastated by this pandemic,” said David Rosen, owner of several eateries including Williamsburg’s the Breakers. He is also co-founder of the Brooklyn Allied Bars and Restaurants and a member of the New York City Nightlife Advisory Board.

“The analysis around why folks are not able to get firm relief from their landlord, or renegotiate around long-term lease agreements or changes, is interesting because the narrative for the past few months has generally trended in a positive direction,” said Rosen.

“I can understand why landlords have been reticent to renegotiate because people have been under the impression that we would reopen or get back to normal,” he added, saying he, too, is in different stages of ongoing discussions with his landlords and doesn’t expect to fully reopen his venues until at least next spring.

“What’s concerning about this report is I would assume given the past two months and with outdoor dining unfortunately will be peak revenue season during this pandemic for restaurants. As we head into the winter, even with indoor dining on the horizon, I don’t think that 25 percent indoor will exceed what exists already outside. This ‘inability to pay rent’ trend will continue, if not worsen,” he said.

“We understand the difficulties facing restaurants, which is why we’re protecting commercial establishments from eviction, allowing bars to sell cocktails via take-out and delivery, and cutting red tape so restaurants can easily expand outdoor dining,” said Jack Sterne, a spokesman for Gov. Cuomo.

Guidelines will be reassessed by Nov. 1 and restaurants may be allowed to increase to 50 percent capacity depending on positive compliance and infection data, according to state officials.


Nearly 60 percent of COVID-19 business closures are permanent: report

Originally appeared on New York Post

Nearly 60 percent of businesses that closed nationwide during the COVID-19 pandemic are never reopening again, according to a report.

 People wearing mask walk past a going out of business sign in front of a retail store in Harlem. 

The vast majority of those businesses are restaurants and gift stores, according to Yelp’s Local Economic Impact Report, a monthly survey of business listings.

As of Aug. 31, 163,735 businesses were listed as closed, with 97,966 of them permanent closures — a 23 percent increase from July 10, the report said.

Within the retail sector, permanent closures of bars and nightclubs grew by 10 percent since July, while closures of beauty related shops grew by 23 percent over the same period. Fitness club closures grew by an alarming 23 percent.

On Monday, the owner of New York Sports Clubs filed for bankruptcy protection, following on the heels of the May bankruptcy filing of Gold’s Gym.

Meanwhile, some businesses have actually thrived during the pandemic, according to the report.

Home improvement businesses, including contractors and plumbers as well as auto-related businesses like towing companies have been spared the brunt of the pandemic.

“Even in the wake of increased closures we’re seeing businesses effectively transition to new operating models while keeping their employees and consumers safe,” the report stated.

The five top cities for permanent closures were New York, Los Angeles, San Francisco, Chicago and Dallas. Pittsburgh, Philadelphia and Baltimore had among the fewest closures, according to the report.

As yellow taxi drivers struggle, city to announce six-month pause on new licenses

 Originally appeared on MarketWatch

Taxi drivers struggling to make ends meet have demanded medallion debt forgiveness and limits on ride-share apps 



Helicopters circled and horns blared in solidarity as a fleet of yellow cabs shut down traffic on the Brooklyn Bridge on Thursday, the latest effort by the city’s beleaguered taxi drivers to draw attention to their cause and demand debt relief for their high-price medallion loans.

“Seventy percent of the drivers are not working. The taxi fleets have most of the taxis in storage,” said Sergio Cabrera, a longtime cabdriver and member of advocacy group Yellow Taxi United. “In 21 years of driving, I’ve never seen it like this.”

With anger among taxi drivers hitting a breaking point, the Taxi and Limousine Commission (TLC) planned to announce a six-month pause on new licenses for for-hire vehicles, a move that could stem the tide of new competition, including from disrupters Lyft LYFT, +0.94%   and Uber UBER, +1.80%  . A formal announcement is expected on Friday.

But the move does little to address drivers’ main demand for debt relief.

The city’s yellow-cab drivers felt the full force of the blow when the coronavirus pandemic hit New York, with trips plummeting 84% from their pre-COVID levels by early April. And while there’s been a slow trickle of returning passengers over the past several months and new relief efforts by the city’s TLC, drivers say it’s still not nearly enough to sustain business as usual — or to pay back expensive medallion loans.

With Manhattan still largely devoid of office workers and tourists, Cabrera said, drivers are turning to the outer boroughs for fares.

“In the outer boroughs where the average people live, there is much more movement,” Cabrera said. “Manhattan is not busy, it’s not functioning the way it should be. I don’t know when it’s going to come back.”

The strain on the city’s taxi drivers is compounded by years of tightening margins and spiraling debt, as competition from apps like Uber and Lyft has flooded city streets, and declining values of the high-price medallions required to operate have left many drivers hundreds of thousands of dollars in debt. In 2018, then-taxi commissioner Meera Joshi characterized a spate of driver suicides as "an epidemic" in the industry.

“COVID is just the latest problem,” said Carolyn Protz, a driver and member of Yellow Taxi United as well as the NYC Taxi Medallion Owner Driver Association. “Our problems as medallion owners go back much longer.”

Members of the New York Taxi Workers Alliance, a union representing both yellow cab and Uber/Lyft drivers, had staged Thursday’s slowdowns on the Brooklyn and Queensboro bridges to draw attention to demands for debt forgiveness for medallion owners.

Representatives of alliance did not respond to multiple requests for comment.

As with many issues facing small-business owners in the pandemic, city officials say that further support and bailout money should come from the federal government and financial institutions. rather than local government agencies already facing budget cuts and potential layoffs.

“The city is obviously in a financial crisis. There’s not a current opportunity for a traditional bailout for medallion owners who are indebted to banks,” TLC Commissioner Aloysee Heredia Jarmoszuk told MarketWatch. “It would require federal action and some regulation for banks that may have taken advantage of medallion owners who find themselves with higher interest and untenable loans.”

Last week, it was reported that Connecticut-based investment firm Marblegate Asset Management LLC has recently forgiven $70 million worth of medallion debt, and in some cases capped individual owners’ debts at a ceiling of $300,000. The average driver-owner carries $600,000 in $600,000 in medallion debt, according to the TWA, and over the past decade, medallion prices had been inflated from around $200,000 to as high as $1 million, an investigation from the New York Times found last year.

Advocates say it’s a helpful step, but more aid is needed.

“Even the amount that they’ve lowered the debt, it’s an undoable amount of money to make those payments on a monthly basis,” said Cabrera, the cabdriver and advocate. “Most of the banks have a forbearance going on medallion payments right now, so that has helped. But we need massive debt relief. We need the city to step in.”

At the height of the pandemic, the TLC launched the Get Food NYC food delivery program, paying licensed taxi drivers to deliver meals to vulnerable New Yorkers. More than 20,000 drivers have participated in the delivery of over 100 million meals since March, according to city data, collectively earning close to $40 million, Jarmoszuk said.

“We have a lot of problems, we cannot deny that,” Jarmoszuk added. “These things did not happen overnight. It could have been far worse, but we were able to put supports in place to lessen the blow. Solutions [will take time] but they will happen.”

Still, drivers are concerned about their debt, and what the industry will look like on the other side of the current crisis. “My concern is for the future, after COVID,” Protz said. “Going forward, there need to be many less for-hire vehicles [on the road].” 

“I’m in the Bronx by the [Bronx Terminal Market],” Cabrera said. “I’ll sit here until a call comes through or someone comes out of the mall. The days are long. The income is not where it needs to be to make any kind of payment on what I owe.”

Friday, September 18, 2020

A New Student Loan Discharge Case allowing the Discharge of $200,000 in Student Loans


A New Student Loan Discharge Case allowing the Discharge of $200,000 in Student Loans 

The 10th Circuit U.S. Court of Appeals in McDaniel v. Navient, has issued a ruling allowing the discharge  of  a debtor/borrower’s $200,000 in private student loan debt, in a Chapter 7 bankruptcy case.

An article about the case can be found at

In this email, we will review the facts of the case, the ruling and its applicability to individuals filing for bankruptcy in the SDNY and the EDNY.

It is estimated that the amount of student loan debt in the United States is presently $1.5 trillion. 

In McDaniel v. Navient, the U.S. Court of Appeals for the 10th Circuit affirmed a  bankruptcy court’s decision that $200,000 of a Debtor’s private student loan debt could be discharged.

What are private student loans? Monies borrowed from a private bank without a government guaranty, rather than money borrowed from a government agency or subject to a government guaranty.

Generally, to discharge student loan debt, a borrower files for chapter 7 bankruptcy and then commences an “adversary proceeding” (a lawsuit within the context of a bankruptcy case) seeking to discharge the student loans based on a concept known as “undue hardship”. 

The “undue hardship test” resulted from a bankruptcy case involving a debtor named  Brunner and the case held that in order to show undue hardship to discharge a student loan, the debtor would need to show three factors:

1. That if the Debtor were required to repay the student loan, the borrower would not be able to maintain a minimal standard of living?

2. That  the borrowers financial difficulties (that  prevent the borrower  from repaying the student loan)  are expected to continue into the future? and 

3. The borrower  made efforts to repay the   student loan prior to  filing for bankruptcy, but were unable to do so?

While the Brunner Test is  easy  to explain on paper, in practice the cost to commence and pursue this litigation is expensive and many debtor’s with student loan debt do not attempt to discharge their student loans in a chapter 7 bankruptcy filing. 

In the McDaniel case the  Debtor had  $120,000 in private student loans and she said  that Navient would not work with her to create  an affordable repayment schedule. 

Ms. McDaniel’s filed for  bankruptcy (she did not attempt to discharge her student loans) and after her case ended, Navient added additional interest and fees to her balance. She then made a motion to reopen her   bankruptcy case to have the Bankruptcy Court rule as to whether her  private student loans were dischargeable in bankruptcy.

The Bankruptcy Court then ruled that the monies sought to be discharged  were not “an obligation to repay funds received as an educational benefit” because the amount borrowed exceeded the cost of attendance at school. 

As a result the monies were not a student loan and the undue hardship did not apply and the student loans were dischargeable as regular debt in the chapter 7 bankruptcy case.

Navient appealed, and the 10th Circuit Court of Appeals affirmed the lower bankruptcy court’s decision. 

What is the take aware for student loan borrowers in this district?

First, the decision only applies to Colorado, New Mexico, Oklahoma, Utah, and Wyoming (10th Circuit). However, since the decision was from a Court of Appeals, bankruptcy courts in this district may affirm or adopt the Court’s  ruling and reasoning. 

Second,  the ruling may only affect the dischargeability of private student loans, not public student loans and the vast majority of student loans are public.

Third, the ruling may only apply to private student loans that exceed the cost of attendance at a school,  rather than all private student loans.

Fourth, bankruptcy is a court of equity and bankruptcy judges are aware of the amount of student loan debt outstanding and the hardship that it causes borrowers and their families and they are sympathetic to debtor’s attempting to discharge their student loans to get the “fresh start” in bankruptcy. 

Fifth, the Brunner Test dates back to 1987 and its holding and applicability to 2020 have been challenged by many bankruptcy experts. 

Sixth, student loan debtors with the right fact patterns should consider filing for chapter 7 bankruptcy and attempting to discharge their student loans.  Jim Shenwick


Thursday, September 10, 2020

Court Allows Bankruptcy Discharge Of $200,000 In Student Loans

This article originally appeared at


Court Allows Bankruptcy Discharge Of $200,000 In Student Loans

Adam S. Minsky, Esq.

A new ruling by a U.S. appeals court has affirmed the cancellation of a borrower’s $200,000 in private student loans.

In McDaniel v. Navient, the U.S. Court of Appeals for the 10th Circuit affirmed a lower bankruptcy court’s determination that a borrower’s private student loan debt could be discharged in bankruptcy.

The bankruptcy code treats student loan debt differently from most other forms of consumer debt, such as credit cards and medical bills. Borrowers must generally prove that they have an “undue hardship” in order to discharge their student loan debt in bankruptcy. These restrictions initially only applied to federal student loans, but were subsequently expanded to cover private student loans following the passage of a 2005 bankruptcy reform bill.

The “undue hardship” standard applied to student loan debt is not adequately defined in statute, so bankruptcy judges have established various tests (which vary by jurisdiction) to determine discharge eligibility. In order to show that they meet this standard, borrowers must initiate an “adversary proceeding,” which is essentially a lawsuit within the bankruptcy case that is brought against the borrower’s student loan lenders. Through the adversary proceeding, the borrower must present evidence showing that they meet the undue hardship standard, while the student lenders present opposing evidence. The adversary proceeding can be a long and invasive process for borrowers, and can get quite expensive for those who retain a private attorney. Student loan lenders may also have significantly more resources than borrowers, which can give them an edge in the litigation. As a result, many student loan borrowers are unsuccessful in proving undue hardship, and many others don’t even try.

The recent ruling from the 10th Circuit could change this.

The borrower in the case had taken out $120,000 in private student loans. When she became unable to afford the monthly payments, she said that Navient would not work with her to provide an affordable repayment schedule (private student loans are not eligible for federal income-driven repayment plans). She eventually went into bankruptcy. After her bankruptcy ended, Navient added on tens of thousands of dollars in additional interest, leaving her in an even worse position and causing her to pay even more money to Navient. She ultimately then petitioned the bankruptcy court to reopen the bankruptcy case to rule that the private student loans were, or should have been, discharged.

Rather than basing the decision on the undue hardship standard, the bankruptcy court found that the private student loans at issue did not even fall within the “undue hardship” provision of the bankruptcy code in the first place. The bankruptcy court held that the borrower’s private student loans were not “an obligation to repay funds received as an educational benefit” within the meaning of the bankruptcy code because they “were not made solely for the ‘cost of attendance’” at the borrower’s school.

Navient appealed, and the 10th Circuit Court of Appeals affirmed the lower bankruptcy court’s decision. Furthermore, the court rejected Navient’s argument that these private student loans were covered by the discharge exemptions provided by the 2005 reforms to the bankruptcy code.

The ultimate impact of this decision remains to be seen. While the case could set important precedent and be cited in future bankruptcy cases, that precedent would (for the time being, at least) be limited only to the 10th Circuit’s jurisdiction, which includes Colorado, New Mexico, Oklahoma, Utah, and Wyoming. Bankruptcy scholars have also suggested that the ruling may only affect the dischargeability of private student loans that either exceed the cost of attendance at an accredited school or private student loans from non-accredited schools, rather than all private student loans.

Nevertheless, the decision is an important ruling, and serves as a reminder that pursuing a bankruptcy discharge of student loan debt is not a lost cause, despite the many hurdles.