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Client Feedback regarding services provided by Shenwick & Associates in a Chapter 7 Bankruptcy Filing March 19, 2021
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Thursday, March 18, 2021
Wednesday, March 17, 2021
A Simple Guide To How NYC Is Screwing Up Giving Debt Forgiveness To Taxi Drivers Jalopnik
This article originally appeared in Jalopnik. A link to the article is below.
https://jalopnik.com/a-simple-guide-to-how-nyc-is-screwing-up-giving-debt-fo-1846478059
A Simple Guide To How NYC Is Screwing Up Giving Debt Forgiveness To Taxi Drivers
Raphael Orlove
The New York City government has set aside $65 million of federal stimulus money to fix the debt crisis among taxi drivers after days, weeks, months of yellow cab protests shutting down bridges and highways. Instead of giving money to the drivers in need, it’s bailing out rich lenders instead, including a big hedge fund in Connecticut.
This is meant to be a simple explainer so I will not attempt to understand or make sense of the city’s decision to bail out lenders not drivers. I can only lay out the dramas involved.
https://jalopnik.com/a-simple-guide-to-how-nyc-is-screwing-up-giving-debt-fo-1846478059
A Simple Guide To How NYC Is Screwing Up Giving Debt Forgiveness To Taxi Drivers
Raphael Orlove
The New York City government has set aside $65 million of federal stimulus money to fix the debt crisis among taxi drivers after days, weeks, months of yellow cab protests shutting down bridges and highways. Instead of giving money to the drivers in need, it’s bailing out rich lenders instead, including a big hedge fund in Connecticut.
This is meant to be a simple explainer so I will not attempt to understand or make sense of the city’s decision to bail out lenders not drivers. I can only lay out the dramas involved.
Taxi Drivers Are In Debt, And The City Is Responsible
Here in New York, you don’t just paint your car yellow and start picking people up off the street. You need a special taxi medallion for your car to be a taxi and pick up hails, and the city limits the number of medallions out there. As you can imagine, with limited supply and strong demand, the value of a medallion could rise. As Uber and Lyft have completely reshaped the taxi landscape here in the city, that value plummeted, and yellow cab drivers are now underwater, struggling to pay off loans on medallions now worth a fraction of what they started as.
Over the past two decades, the city not only watched as these prices skyrocketed, but encouraged it. To put some figures on that, medallion prices shot up 455 percent from 2001 to 2014 (the last city auction for medallions), as the New York Times reported, only to quickly drop again. That meant medallions “went from $200,000 in 2002 to over $1 million in 2014, then crashed to less than $200,000 soon after,” as City and State NY put it.
Under both the Bloomberg and De Blasio administrations, the city made $855 million off of those values, as the NY Times reported in 2019. A new NY Times feature lays out how the city helped:
As The New York Times reported in a series of articles, a group of taxi industry leaders had artificially inflated the price of a medallion to more than $1 million from about $200,000. They channeled immigrant drivers into loans they could not afford, creating a buying spree that drove up the price of the permits, and then extracted hundreds of millions of dollars before the bubble burst.
During the bubble, government officials worsened the problems by exempting the industry from regulations. The city also chose to fill budget gaps by selling medallions and running ads promoting the permits as “better than the stock market.”
The city sold those medallions, profited off of them. Now it’s the drivers who are suffering. As NPR put it in 2018, “cities made millions selling taxi medallions, now drivers are paying the price.”
It’s also the city that helped create drivers’ debt, so its job is easy: forgive the debt. What has the city done? Bailed out the lenders instead.
What’s The City’s Plan?
Let drivers borrow $20,000 to pay their medallion debt, and they can borrow another $9,000 for other monthly payments.
What Does This Accomplish?
Here in New York, you don’t just paint your car yellow and start picking people up off the street. You need a special taxi medallion for your car to be a taxi and pick up hails, and the city limits the number of medallions out there. As you can imagine, with limited supply and strong demand, the value of a medallion could rise. As Uber and Lyft have completely reshaped the taxi landscape here in the city, that value plummeted, and yellow cab drivers are now underwater, struggling to pay off loans on medallions now worth a fraction of what they started as.
Over the past two decades, the city not only watched as these prices skyrocketed, but encouraged it. To put some figures on that, medallion prices shot up 455 percent from 2001 to 2014 (the last city auction for medallions), as the New York Times reported, only to quickly drop again. That meant medallions “went from $200,000 in 2002 to over $1 million in 2014, then crashed to less than $200,000 soon after,” as City and State NY put it.
Under both the Bloomberg and De Blasio administrations, the city made $855 million off of those values, as the NY Times reported in 2019. A new NY Times feature lays out how the city helped:
As The New York Times reported in a series of articles, a group of taxi industry leaders had artificially inflated the price of a medallion to more than $1 million from about $200,000. They channeled immigrant drivers into loans they could not afford, creating a buying spree that drove up the price of the permits, and then extracted hundreds of millions of dollars before the bubble burst.
During the bubble, government officials worsened the problems by exempting the industry from regulations. The city also chose to fill budget gaps by selling medallions and running ads promoting the permits as “better than the stock market.”
The city sold those medallions, profited off of them. Now it’s the drivers who are suffering. As NPR put it in 2018, “cities made millions selling taxi medallions, now drivers are paying the price.”
It’s also the city that helped create drivers’ debt, so its job is easy: forgive the debt. What has the city done? Bailed out the lenders instead.
What’s The City’s Plan?
Let drivers borrow $20,000 to pay their medallion debt, and they can borrow another $9,000 for other monthly payments.
What Does This Accomplish?
With some drivers hundreds of thousands of dollars in debt, it doesn’t accomplish a lot! All it does, basically, is funnel a bunch of money to big lenders without helping drivers.
How The City Is Bailing Out Lenders Not Drivers
It’d be hard for me to even think up a plan of debt forgiveness that bails out rich lenders not poor drivers, but that’s exactly what the city is planning. Speaking with news outlet Business of Business, Bhairavi Desai, leader of the profit union New York Taxi Workers Alliance, laid out the way the city is bailing out lenders using the hedge fund Marblegate as an example. Marblegate is based in Greenwich, Connecticut (drivers drove all the way there in protest last year) and is the largest holder of medallion loans, as Business of Business reports.
Here’s how the city bails out lenders not drivers by funneling its relief money right back to them, as Desai explains:
In 2018 [Marblegate] bought about 300 taxi medallions, hedging their bets on the struggling industry; Uber and Lyft (which don’t require medallions) were just flourishing. Since February 2020, Marblegate started to purchase the medallion loans from lenders.
In the proposal that the city just announced, medallion owners can borrow $20,000 from the city at zero interest, but it must be used as leverage to negotiate debt restructuring. So, the city’s plan is to essentially loan owner/drivers $20,000 that they can then turn around and offer to the lender, Marblegate, or banks, or credit unions, with no concessions from the lenders as to what the new balance would be on these loans.
Not only is the city directing its stimulus through the drivers to the lenders, it is doing it with no guarantee that the loans will be meaningfully paid down.
How Much Debt Are We Talking About Here?
“The city’s plan is not nearly enough to bail out the drivers, who each owe about $500,000 in loans on average,” as the NY Times put it recently.
Why The City Is Bailing Out Lenders Not Drivers
The De Blasio administration is experiencing a lame duck year, with city elections coming November 2021. Current officials will be looking for work, and it doesn’t look like they want to become cabbies. “Many of them come out of finance,” Desai puts it. “They’re making their plans to go back into finance.” Securing a bailout for a big operation like Marblegate doesn’t look bad on that resume.
What The Taxi Drivers Want
How The City Is Bailing Out Lenders Not Drivers
It’d be hard for me to even think up a plan of debt forgiveness that bails out rich lenders not poor drivers, but that’s exactly what the city is planning. Speaking with news outlet Business of Business, Bhairavi Desai, leader of the profit union New York Taxi Workers Alliance, laid out the way the city is bailing out lenders using the hedge fund Marblegate as an example. Marblegate is based in Greenwich, Connecticut (drivers drove all the way there in protest last year) and is the largest holder of medallion loans, as Business of Business reports.
Here’s how the city bails out lenders not drivers by funneling its relief money right back to them, as Desai explains:
In 2018 [Marblegate] bought about 300 taxi medallions, hedging their bets on the struggling industry; Uber and Lyft (which don’t require medallions) were just flourishing. Since February 2020, Marblegate started to purchase the medallion loans from lenders.
In the proposal that the city just announced, medallion owners can borrow $20,000 from the city at zero interest, but it must be used as leverage to negotiate debt restructuring. So, the city’s plan is to essentially loan owner/drivers $20,000 that they can then turn around and offer to the lender, Marblegate, or banks, or credit unions, with no concessions from the lenders as to what the new balance would be on these loans.
Not only is the city directing its stimulus through the drivers to the lenders, it is doing it with no guarantee that the loans will be meaningfully paid down.
How Much Debt Are We Talking About Here?
“The city’s plan is not nearly enough to bail out the drivers, who each owe about $500,000 in loans on average,” as the NY Times put it recently.
Why The City Is Bailing Out Lenders Not Drivers
The De Blasio administration is experiencing a lame duck year, with city elections coming November 2021. Current officials will be looking for work, and it doesn’t look like they want to become cabbies. “Many of them come out of finance,” Desai puts it. “They’re making their plans to go back into finance.” Securing a bailout for a big operation like Marblegate doesn’t look bad on that resume.
What The Taxi Drivers Want
What the Taxi Workers Alliance plan entails is for the city to write down the loans to $125,000 and bail out the drivers it has helped send spiraling into debt. The lenders still get paid, but the drivers are in the clear, as Desai explains:
Our proposal has been that the city set up a backstop—if the hedge fund or bank reduced the debt to $125,000, the City of New York would guarantee it, 100% of delinquency. The medallion owners are protected and the banks and hedge fund would be guaranteed $125,000, even if the debt is $300,000 for example.
Marblegate can only collect amounts like $300,000 if people own assets; they’re hedging their bets on enough of the drivers having assets.
Even in the [worst] case scenario, our plan would end up costing the city $75 million over 20 years. Our plan is more fiscally sound and would be life-saving. Their plan costs more and does absolutely nothing, offers no relief.
The City Is Still Under Pressure
This crisis has been going on for years, and it is on the back of protests and direct pressure from other parts of the city government. The protests have not stopped (we are in the seventh day of protests from the Taxi Workers Alliance, with some very good looking food being made in solidarity), and the threat of a lawsuit isn’t cleared, either. New York state attorney general Letitia James threatened to sue the city for $810 million last year, but dropped the suit in late February 2021 in favor of supporting the Taxi Workers Alliance plan. It’s possible that the city is not completely off the hook, though as the New York Times currently reports:
The city could still face a lawsuit from the state attorney general, Letitia James, whose office investigated the crisis in response to the Times series and found the city was chiefly responsible. Ms. James announced last year that unless the city bailed out cabdrivers, she would sue the city for $810 million and give it to drivers. Her office did not respond to a request for comment about whether the mayor’s plan answered her findings.
City comptroller Scott Stringer was also at the protests calling for the Taxi Workers Alliance proposal
Our proposal has been that the city set up a backstop—if the hedge fund or bank reduced the debt to $125,000, the City of New York would guarantee it, 100% of delinquency. The medallion owners are protected and the banks and hedge fund would be guaranteed $125,000, even if the debt is $300,000 for example.
Marblegate can only collect amounts like $300,000 if people own assets; they’re hedging their bets on enough of the drivers having assets.
Even in the [worst] case scenario, our plan would end up costing the city $75 million over 20 years. Our plan is more fiscally sound and would be life-saving. Their plan costs more and does absolutely nothing, offers no relief.
The City Is Still Under Pressure
This crisis has been going on for years, and it is on the back of protests and direct pressure from other parts of the city government. The protests have not stopped (we are in the seventh day of protests from the Taxi Workers Alliance, with some very good looking food being made in solidarity), and the threat of a lawsuit isn’t cleared, either. New York state attorney general Letitia James threatened to sue the city for $810 million last year, but dropped the suit in late February 2021 in favor of supporting the Taxi Workers Alliance plan. It’s possible that the city is not completely off the hook, though as the New York Times currently reports:
The city could still face a lawsuit from the state attorney general, Letitia James, whose office investigated the crisis in response to the Times series and found the city was chiefly responsible. Ms. James announced last year that unless the city bailed out cabdrivers, she would sue the city for $810 million and give it to drivers. Her office did not respond to a request for comment about whether the mayor’s plan answered her findings.
City comptroller Scott Stringer was also at the protests calling for the Taxi Workers Alliance proposal
PPP Loans, Debtor in Possession Financing, Chapter 11 Debtors and Subchapter V Debtors
As several readers of our emails and blogs know, Congress has passed a new form of Chapter 11 bankruptcy for small business debtors. Details about this kind of bankruptcy filing can be located at our blog at https://shenwick.blogspot.com/search?q=subchapter+v
When a company files for bankruptcy, frequently they will need debtor in possession financing to remain in business and reorganize. While the Bankruptcy Code provides for a debtor in possession financing, our experience and the experience of many of our clients have been that debtor in possession financing is very difficult for small businesses to obtain after they file for Chapter 11 bankruptcy. This circumstance should be contrasted with large publicly traded companies that file for Chapter 11 bankruptcy, in which a market exists to provide those companies with a debtor in possession financing.
After the Paycheck Protection Program (the "PPP") was established in The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), enacted on March 27, 2020, many bankruptcy attorneys, financial advisors and accountants believed that PPP money may be a source of debtor in possession financing for Chapter 11 debtors and Subchapter V debtors.
The CARES Act extended PPP loans to Subchapter V small business debtors, but unfortunately not to Chapter 11 debtors.
The CARES ACT further allows that PPP loans will be offered only if the SBA Administrator in its discretion sends a letter to the Director of the Executive Office for United States Trustee allowing PPP loans in bankruptcy-unfortunately to date, the SBA has not sent that letter.
Due to the SBA administrator not sending that letter, it is unclear as to whether small business subchapter fee debtors will qualify for PPP loans.
Qualification may be based upon whether the Subchapter V Debtor received a 1st PPP loan, whether the loan was repaid or forgiven, or whether the SBA suffered a loss as a result of the 1st PPP loan.
Alison Bauer at Foley Hoag LLP wrote a great article on March 10, 2021 on this topic: “PPP Loans and Small Business Debtors in Bankruptcy”, which can be found at
https://www.jdsupra.com/legalnews/ppp-loans-and-small-business-debtors-in-5140892/
As a result, Chapter 11 debtors are not eligible for PP pay loans.
Subchapter V debtors may qualify for PPP loans, but they must proceed with caution and they may want to contact their bank or other banks that are processing PPP loans to determine whether they would qualify for a loan if they file for Subchapter V bankruptcy.
Individuals with questions about subchapter V Bankruptcy should contact Jim Shenwick at 212-541-6224 or jshenwick@gmail.com
Wednesday, March 10, 2021
NYC Pledges $65 Million of Taxi Aid That Drivers Call ‘Horrible’
This article first appeared at Yahoo Finance and link is below.
https://finance.yahoo.com/news/nyc-pledges-65-million-taxi-163158992.html
NYC Pledges $65 Million of Taxi Aid That Drivers Call ‘Horrible’
Henry Goldman
Tue, March 9, 2021, 11:31 AM·1 min read
(Bloomberg) -- New York City is creating a $65 million fund to help taxi medallion owners, but drivers called the plan “a disgraceful betrayal from a city that already has blood on its hands.”
The proposal, funded with federal stimulus money, will offer $20,000 loans to help restructure debts on taxi medallions, and as much as $9,000 in debt payment support, said Taxi and Limousine Commissioner Aloysee Heredia Jarmoszuk.
“I think this new plan will be a difference maker for many drivers,” Mayor Bill de Blasio said Tuesday.
But Bhairavi Desai, executive director of the 21,000-member Taxi Workers Alliance, said the plan is “horrible” and “does absolutely nothing for us.”
“It’s a cash bailout for lenders while we are left to drown in debt, foreclosure & bankruptcy,” Desai said in a Twitter post. “No debt forgiveness. No collective solution. No justice.”
In response, the mayor said, “It’s very easy to call for plans that aren’t going to work. Our job is to come up with solutions that will actually work.”
Read more here: N.Y. Attorney General Seeks $810 Million From NYC for Taxi Fraud and here: Suicides, Traffic Hell in NYC Spur Second Look at Uber’s Growth
The market for taxi operating permits known as medallions has collapsed with the onset of the digital ride-hailing industry, leaving thousands of drivers facing financial ruin. Several have committed suicide.
The Alliance has called on the city to help convince and incentivize lenders to restructure their debt.
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Now, the bill heads to the Senate where it is expected to pass.
If you have any questions regarding Subchapter v please contact Jim Shenwick 212 541 6224 jshenwick@gmail.com