Happy Holiday and a Happy and Healthy New Year to All!

 Happy Holiday and a Happy and Healthy New Year to all!

This year, we received many referrals from friends and colleagues.

At Shenwick & Associates, we have been very busy counseling clients with regard to defaulted SBA EIDL loans, advising clients who want to vacate their leased property in Manhattan, and dealing with Good Guy Guaranty issues.

Personal bankruptcy filings have increased and we expect more personal bankruptcy filings in 2023 due to the new procedures in place for discharging student loans in chapter 7 bankruptcy, due to “hardship”.

Jim Shenwick

Already slammed by inflation, small businesses struggle to repay COVID-19 disaster loan

 CBS News has a post titled "Already slammed by inflation, small businesses struggle to repay COVID-19 disaster loans". The post can be found at https://www.cbsnews.com/news/small-businesses-eidl-loans-repayment-inflation-covid-19-pandemic/

This article is consistent with what we are hearing from many clients, who took out EIDL covid 19 loans and who are unable to repay them due to market factors. Jim Shenwick, Esq jshenwick@gmail.com 212 541 6224

Does My Spouse Have To Pay My Student Loans If I Die?

 Many clients contact Shenwick & Associates and ask if they are liable for a spouse's debts, particularly student loans.  AOL has an article titled “  Does My Spouse Have To Pay My Student Loans If I Die?” which answers that question and others. The article can be found at https://www.aol.com/finance/does-spouse-pay-student-loans-143003556.html 

Jim Shenwick, Esq.   212 541 6224  jshenwick@gmail.com

Student loan debt: 9 million wrongly told they were approved for debt forgiveness

 kiro 7 is reporting that "Student loan debt: 9 million wrongly told they were approved for debt forgiveness" The article can be found at

https://lnkd.in/e9iAtkkV

Jim Shenwick, Esq. 212 541 6224 jshenwick@gmail.com

Biden administration asks the Supreme Court to take on another student-loan forgiveness lawsuit, saying the lower court blocking the debt relief 'profoundly erred

 Biden administration asks the Supreme Court to take on another student-loan forgiveness lawsuit, saying the lower court blocking the debt relief 'profoundly erred as reported by Yahoo at https://lnkd.in/egUmizFb

Jim Shenwick, Esq 212 541 6224 jshenwick@gmail.com

CANCELING, TERMINATING, OR BREAKING A COMMERCIAL LEASE IN NEW YORK CITY AND THE GOOD GUY GUARANTY

 CANCELING, TERMINATING, OR BREAKING A COMMERCIAL LEASE IN NEW YORK CITY AND THE GOOD GUY GUARANTY

Whether it is crime, quality of life, or economics, many small businesses are looking to terminate or break their commercial leases before they expire.  Those tenants include  retailers, restaurants or office lease tenants.

Mr. Van Nieuwerburgh, a Columbia professor, calculates that New York office space on average costs about $16,000 a year per employee. “That’s real money,” he said, “and companies will try to save that”. The article quoting Mr. Nieuwerburgh can be found at https://www.nytimes.com/2022/11/17/business/office-buildings-real-estate-vacancy.html 

Many tenants looking to terminate their leases have contacted us regarding an early termination of their lease and the sticking point is usually the Good Guy Guaranty that the principal of the business signed. Strategies for dealing with Good Guy Guaranties are discussed below. 

Jim Shenwick, Esq has represented over 500 tenants in commercial lease negotiations and he has an active bankruptcy and workout law practice. 

BACKGROUND

In New York City, most commercial tenants are corporations or limited liability companies, and these entities are the tenants on the commercial office leases. The principal or principals of the corporation or LLC are almost always required to guarantee the lease in New York City.

 In New York, there are two types of lease guarantees. The full or complete guarantee of rent payment or the GOOD GUY GUARANTY, which is a specialized form of guarantee that can be limited in duration, if certain conditions enumerated in the GOOD GUY GUARANTY are met.

As example, under a  full or complete guarantee, if a tenant fails to make lease payments for 6 months and owes $50,000 for the remaining term of the lease, the Landlord can sue the guarantor for $50,000.

 A second type of guarantee is known as a Good Guy Guaranty, which limits the principal's exposure under the guarantee. To be a “good guy” means that the tenant vacates the space and delivers possession to the Landlord and the guarantor complies with the terms of the Good Guy Guaranty.

 Below is an example of how GOOD GUY GUARANTY operates.

The GOOD GUY GUARANTY  commonly provides that the guarantor’s financial exposure terminates when the following conditions are met: 1. the tenant sends notice to the Landlord that it is vacating the leased space (the notice required is generally 90 to 120 days), 2. the tenant must be current on  rent, when it sends the notice to the Landlord or when it vacates the space, 3.the space must be left “broom clean” and 4. keys for the office must be delivered to the Landlord.

 If all four conditions are met, the guarantor is released from liability under the Lease. In the event that the 4 conditions are not met, the guarantor remains liable until the lease expires.

 If a tenant closes for business or files for bankruptcy, and the conditions for the Good Guy Guaranty are not satisfied, the Landlord can or will sue the guarantor.  The statute of limitations is 6 years.

What can the Good Guy Guarantor do?

1. The Good Guy Guarantor can engage in asset protection planning, prior to entering into the GOOD GUY GUARANTY or prior to terminating the lease, provided that that planning is allowed under  New York State law and not a fraudulent conveyance.   

2. The Good Guy Guarantor can file for chapter 7 bankruptcy to discharge the monies owed under the Good Guy Guaranty.

3. The Good Guy Guaranty can engage in workout negotiations with the landlord and/or threaten a bankruptcy filing  or

4. The Good Guy Guaranty can do nothing and hope that the landlord does not sue the guarantor.

The optimal strategy depends on the facts and circumstances of each case and involves a thorough review of the lease, the guarantee and the financial situation of the guarantor. 

Clients who have guaranteed leases can contact Jim Shenwick, Esq. 212 541 6224 jshenwick@gmail.com to discuss their options.

U.S. appeals court rejects Biden's bid to revive student debt plan

 Reuters is reporting that U.S. appeals court rejects Biden's bid to revive student debt plan. The article can be found at https://www.reuters.com/world/us/us-appeals-court-rejects-bidens-bid-revive-student-debt-plan-2022-12-01/

Jim Shenwick, Esq.

Discharging Student Loans In Bankruptcy May Be Simpler & Easier

On Nov  17, 2022 the Biden Administration announced a new path to Discharging Student Loan Debt in Bankruptcy (litigation in Bankruptcy Court).  The New York Times has a story on this topic that can be found at https://www.nytimes.com/2022/11/17/your-money/bankruptcy-student-loans.html

The new path “outlines a better, fairer, more transparent process for student loan borrowers in bankruptcy,” according to Associate Attorney General Vanita Gupta. 

Once enacted, the guidance will make it easier for attorneys at the Justice Department and Education Department to identify cases in which Federal student loans may be discharged.

The New York Times article states that under the new guidelines, debtors will complete an "attestation form" that the government will use to determine whether a discharge should be recommended for Federal Student Loans. A Debtor will have to demonstrate hardship, such as having expenses that exceed their income or having a mental or physical disability that prevents them from repaying the loan. In such cases, the government lawyers will recommend a full or partial discharge of the debtor's student loans.

Student loans can only be discharged under the current system by filing for personal bankruptcy and then filing a lawsuit or adversary proceeding.

Adversary proceedings are expensive and difficult to pursue, and according to experts less than 1 percent of personal bankruptcy filers try to discharge their student loans.

The attestation form will hopefully make the adversary proceeding simpler and easier, so more debtors will be able to discharge their loans. 

Shenwick & Associates will close following these developments, and anyone with questions should contact Jim Shenwick, Esq.  jshenwick@gmail.com  212-541-6224

The Moratorium on Federal Student Loan Payments has been extended again by President Biden to June 30, 2023

 The moratorium on federal student loan payments has been extended again by President Biden to June 30, 2023. An article on this topic can be found on cnet at https://www.cnet.com/personal-finance/loans/student-loan-pause-extended-again-heres-when-youll-have-to-start-paying/

Jim Shenwick, Esq   212 541 6224   jshenwick@gmail.com

Healthcare providers are now Prohibited from Satisfying Medical Debt by collecting wages or placing liens on patients’ homes under a law sign by Governor Hochul on Wednesday November 23, 2022

 Governor Hochshul signed a bill on Wednesday November 23, 2022, prohibiting healthcare providers from collecting wages or liening patients' homes to satisfy medical debts. An article about the bill can be found at https://www.mytwintiers.com/news-cat/state-news/hochul-signs-bill-to-protect-new-yorkers-with-medical-debt/

If a creditor wishes to collect a debt in New York, they must sue the debtor, obtain a judgment, and then enforce the judgment.

 

Under New York law a  judgment is good for 20 years. Creditors who attempt to enforce judgments generally do three things: 1.  Lien and levy  on a debtors checking account or brokerage account, 2. Docketing the judgment against the debtor’s house and foreclosing on the judgment and 3. Wage garnishment, a legal procedure in which a person's earnings (10%) are required by court order to be withheld by an employer, and paid to a creditor in satisfaction  of a debt.

With the new law signed by the governor, medical creditors will no longer be able to garnish wages or docket judgments against a debtor's house in order to collect on those judgments. If you have any questions about the enforcement of judgments, please contact Jim Shenwick, Esq at jshenwick@gmail.com or  at 212-541-6224.

11 Things You Should Know About Chapter 11 Bankruptcy

 Yahoo has a very helpful article about 11 Things You Should Know About Chapter 11 Bankruptcy. 
The article can be found at https://www.yahoo.com/now/11-things-know-chapter-11-161433809.html
Jim Shenwick, Esq   212 541 6224  jshenwick@gmail.com

Student Loan Forgiveness Update

 

ABC has a very helpful article about "Student loan forgiveness update: What borrowers need to know after federal court struck down program". The article can be found at 

https://abc7ny.com/will-student-loans-be-forgiven-biden-forgiveness-loan-update/12451011/

Jim Shenwick, Esq   917 363 3391  jshenwick@gmail.com

Better to connect-What small business owners need to know about repaying loans tied to pandemic relief from the SBA EIDL Loans

WCNC has an article titled "Better to connect-What small business owners need to know about repaying loans tied to pandemic relief from the SBA"  EIDL Loans. 

SBA EIDL loan repayment begin this month! As the article notes many borrowers will be unable to repay their EIDL loans.

The article can be found at https://www.wcnc.com/article/money/pandemic-sba-small-business-loan-money-local/275-ba12435e-ca7e-48d8-9cad-1c251bbdf706

Borrowers who cannot repay their loans, should contact Jim Shenwick, Esq.  jshenwick@gmail.com

917 363 3391 for assistance with these problems. 

Consequences of Filing for Personal Bankruptcy

 Forbes has an article about the consequences of filing for personal bankruptcy. The article can be found at   https://www.forbes.com/advisor/debt-relief/bankruptcy-consequences/

Individuals with questions about personal bankruptcy can contact Jim Shenwick Esq.   jshenwick@gmail.com   917 363 3391

The Automatic Stay and Section 362 of the Bankruptcy Code

 When a bankruptcy petition is filed, section 362(a) of the Bankruptcy Code states that the bankruptcy petition provides a stay on the commencement or continuation of an action or proceeding against the debtor.

An "Automatic Stay" provides relief to the debtor by stopping all litigation and collection efforts against him, giving him pause and time to reorganize his finances.

After bankruptcy filing, creditors who wish to continue litigation against the debtor must file a motion to lift the stay in Bankruptcy Court. The most common bankruptcy motion is a motion to lift the stay.

Last week, we filed two motions to lift the stay, one for a landlord and one for a creditor, so they could finalize an eviction and foreclosure.

The law stayed litigation and landlord tenant actions during the pandemic, now creditors and landlords are free to pursue litigation, resulting in increased bankruptcy filings and motions to lift the stay.

The Second Circuit Court of Appeals recently decided a Motion Lift Stay case, In re Fogarty, 39 F. 4th 62 Court of Appeals, 2nd Circuit 2022 which demonstrates the complexity and questions that can arise in lift stay practice.

Debtor Eileen Fogarty owned a 99% interest in 72 Grandview LLC, which in turn owned a residential property that Fogarty occupied as her primary residence. Bayview Loan Servicing LLC initiated a foreclosure action in which both 72 Grandview LLC and Fogarty were named as defendants. After Bayview obtained a judgment, Fogarty filed a Chapter 7 bankruptcy petition  and Bayview proceeded with the foreclosure sale without seeking relief (i.e. filing a motion for relief from the automatic stay) from the bankruptcy court.

Fogarty then sought sanctions against Bayview arguing that Bayview willfully violated the automatic stay. The bankruptcy court denied Fogarty's motion, but the district court reversed that decision and Bayview appealed to the 2nd Circuit Court of Appeals. 

The 2nd Circuit ruled that Bayview violated the automatic stay based on the fact that the debtor was a named party in the foreclosure proceedings (even if the debtor held only a possessory interest in the property) and Bayview was aware that Fogarty had filed a bankruptcy petition.

The takeaway from the Fogarty case, is that a creditor must proceed with cause after a Debtor files for bankruptcy and when in doubt a creditor should file a motion to lift stay before foreclosing on property. 

Creditors that have questions regarding Motions to Lift Stay can contact Jim Shenwick, Esq   jshenwick@gmail.com   917 363 3391.

    

Yahoo is reporting that Individual Chapter 13 Bankruptcies Increase 27 Percent Over Last Year

 Yahoo is reporting that in October Individual Chapter 13 Bankruptcies Increase 27 Percent Over Last Year. The article can be found at https://lnkd.in/erj-t-4m

Jim Shenwick, Esq jshenwick@gmail.com 917 363 3391

6 Steps to Prepare for the Next Restructuring Wave

 THE CFO website has a very useful article on restructuring businesses. The article is titled:

6 Steps to Prepare for the Next Restructuring Wave

It can be found at:

https://www.cfo.com/budgeting-planning/strategy-budgeting-planning/2022/10/bankruptcy-restructuring-recession-supply-chain-liquidity-risk/

Jim Shenwick, Esq jshenwick@gmail.com 917 363 3391

The Standard for Dismissal of an individual’s Chapter 7 case based on the Debtor’s pre-petition bad faith behavior.

 Fox Rothchild has published an article regarding the standard for dismissal of an individual’s Chapter 7 case based on the Debtor’s pre-petition bad faith behavior. The article can be viewed at https://www.jdsupra.com/legalnews/is-prepetition-bad-faith-cause-for-45603/

Jim Shenwick, Esq. jshenwick@gmail.com 917 363 3391

Chapter 7 vs. Chapter 13 Bankruptcy: Which Is Best for You?

 Chapter 7 vs. Chapter 13 Bankruptcy: Which Is Best for You? See the informative article at https://wtop.com/news/2022/10/chapter-7-vs-chapter-13-bankruptcy-which-is-best-for-you/

For those people with questions about chapter 7 bankruptcy please contact Jim Shenwick,Esq. jshenwick@gmail.com 917 363 3391

Biden’s Student Loan Forgiveness Application Is Here — 5 Tips Before You Submit

 Forbes has an informative article about Biden’s Student Loan Forgiveness Application Is Here — 5 Tips Before You Submit

The article can be found at https://www.forbes.com/sites/adamminsky/2022/10/15/bidens-student-loan-forgiveness-application-is-here---5-tips-before-you-submit/?sh=4f09346b3358

JIm Shenwick, Esq 212 541 6224 jshenwick@gmail.com

The Differences between Chapter 7 and 11 for a Small Business

 PR News Wire has a post on the differences between Chapter 7 and 11 for a small business. The post can be found at https://www.prnewswire.com/news-releases/differences-between-chapter-11-and-chapter-7-bankruptcy-301651391.html

Jim Shenwick, Esq jshenwick@gmail.com 212 541 6224

Bills have been introduced in Congress to amend the Bankruptcy Laws

 Bills have been introduced in Congress to amend the bankruptcy laws. An excellent article discussing the proposed law titled "Consumer Bankruptcy Overhaul Envisioned in New Bill: Explained" can be found at

https://news.bloomberglaw.com/bankruptcy-law/consumer-bankruptcy-overhaul-envisioned-in-new-bill-explained-1

James Shenwick, Esq jshenwick@gmail.com 212-541-6224

WUFT is reporting that virtually all PPP loans have been forgiven with limited scrutiny

WUFT is reporting that virtually all PPP loans have been forgiven with limited scrutiny. The article can be found at https://www.wuft.org/nation-world/2022/10/12/virtually-all-ppp-loans-have-been-forgiven-with-limited-scrutiny/#:~:text=Officials%20promised%20a%20robust%20review,close%2C%20hands%2Don%20reviews.

Jim Shenwick, Esq 212-541-6224 jshenwick@gmail.com

Yahoo is reporting an increase in bankruptcy filings. The story titled "Year-over-year U.S. Bankruptcy Filings Increase for Second Consecutive Month in September 2022"

 Yahoo is reporting an increase in bankruptcy filings. The story titled "Year-over-year U.S. Bankruptcy Filings Increase for Second Consecutive Month in September 2022" can be found at https://www.yahoo.com/now/over-u-bankruptcy-filings-increase-161100672.html

EIDL Loan Default Questions & Answers

 EIDL Loan Default Questions & Answers

As many readers  of our blog posts know, at Shenwick &Associates we are representing many individuals and companies that have defaulted on  Economic Injury Development Loans (EIDL) from the SBA.

Below are commonly asked questions and answers that we have been asked regarding EIDL  loan defaults.

1.  Question: If I personally guaranteed an EIDL  and my company  defaulted on the loan and I guaranteed that loan, can the SBA foreclose and take possession of my house?

Answer:  Yes.  However in New York state if the borrower owns the house with his wife, as tenants by the entirety and the wife did not guarantee the EIDL loan, then the SBA cannot foreclose and obtain   possession of the house. The borrower can continue to live in the house. However, the borrower and his wife will not be able to sell or refinance the house, as a result of the SBA judgment. 

2.  Question: If I default on an EIDL  loan and I have not closed the business or sold all of the assets, can I make an offer in compromise (OIC)  with the SBA regarding the loan default?

Answer:  Generally no, one of the conditions of an OIC is that the business has closed and all of the assets of that business have been sold.

3. Question:  if my business files for Chapter 7 bankruptcy protection, will that bankruptcy filing stop SBA collection actions against the company?

Answer:  Yes, a Chapter 7 bankruptcy filing stays SBA collection actions due to the automatic stay under Section 362 of the bankruptcy code.  The automatic stay comes into effect when a bankruptcy case is filed and the debtor needs to take no further action after a bankruptcy filing to stop SBA collection actions.

4. Question:  If my company files for chapter bankruptcy protection, am I still personally liable if I guaranteed an SBA loan, notwithstanding the company's bankruptcy filing. 

Answer: Yes, if the company files for Chapter 7 bankruptcy and the principal guaranteed the loan, then the SBA can pursue the guarantor for money due under the SBA loan.

5.Question:  If I guaranteed an EIDL  for my company, and my company files for Chapter 7 bankruptcy or closes, and then I file for chapter 7 bankruptcy, will my  personal chapter 7  bankruptcy filing stop SBA collection actions against me?

Answer: Yes.  If an individual files for Chapter 7 bankruptcy due to an EIDL default or  other judgments or debts, the automatic stay in the personal chapter 7 bankruptcy filing stops  SBA collection actions against the individual (also known as the debtor).

6. Question: If my company defaults under an SBA loan, can the SBA foreclosure (take possession) of the company' property or assets that were collateral for the SBA loan?

Answer: Yes, EIDL loans for more than $20,000.00 required that the company enter into a UCC-1 and Security Agreement for the benefit of the SBA and those documents allow the SBA to foreclose/take possession of those assets.

7. Question: Where can I learn more about EIDL defaults and bankruptcy filings?

Answer: At Shenwick & Associates we have a blog with many posts on this topic, which can be viewed at https://shenwick.blogspot.com/ 

Our EIDL posts include the following:  

http://shenwick.blogspot.com/2022/07/eidl-loan-workouts-and-bankruptcy.html 

http://shenwick.blogspot.com/2022/07/eidl-loans-and-sba-offer-in-compromise.html

https://shenwick.blogspot.com/2022/07/eidl-loan-default-document-review.html

https://shenwick.blogspot.com/2022/07/eidl-defaulted-loans.html

Individuals or businesses who would like to speak to Jim Shenwick, Esq. regarding EIDL loan defaults and bankruptcies can  contact him at  jshenwick@gmail.com or 212 541-6224.

FOR MORE BLOG POSTS ABOUT SBA EIDL LOANS SEE:

EIDL LOAN WORKOUTS AND BANKRUPTCY

https://shenwick.blogspot.com/2022/07/eidl-loan-workouts-and-bankruptcy.html

EIDL Loan Default Questions & Answers https://shenwick.blogspot.com/2022/10/eidl-loan-default-questions-answers.html EIDL LOAN DEFAULT DOCUMENT REVIEW, WORKOUT, BANKRUPTCY FILING & OFFER IN COMPROMISE https://shenwick.blogspot.com/2022/07/eidl-loan-default-document-review.html EIDL Defaulted Loans https://shenwick.blogspot.com/2022/07/eidl-defaulted-loans.html New Relief Program for SBA EIDL Borrowers Who are Having Difficulty Repaying EIDL Loans " Hardship Accommodation Plan" https://shenwick.blogspot.com/2023/05/new-relief-program-for-sba-eidl.html EIDL LOANS and SBA OFFER IN COMPROMISE PROGRAM https://shenwick.blogspot.com/2022/07/eidl-loans-and-sba-offer-in-compromise.html PPP & EIDL Fraud https://shenwick.blogspot.com/2022/08/ppp-eidl-fraud.html Better to connect-What small business owners need to know about repaying loans tied to pandemic relief from the SBA EIDL Loans https://shenwick.blogspot.com/2022/11/better-to-connect-what-small-business.html