Wiping out the nation’s student-loan debt could have unintended financial consequences for borrowers

By: Andrew Keshner
From: Marketwatch

https://www.marketwatch.com/story/wiping-out-the-nations-student-loan-debt-could-have-unintended-financial-consequences-for-borrowers-2020-02-12

Student loan borrowers announce a strike, refusing to pay their debts

By: Annie Nova
From: cnbc.com

https://www.cnbc.com/2020/02/12/student-loan-borrowers-announce-a-strike-refusing-to-pay-their-debts.htm

The Best Way to Use a Credit Card? Treat It Like Cash from New York Times

The Best Way to Use a Credit Card? Treat It Like Cash from New York Times February 12, 2020

Fewer people than ever carry cash these days, it seems. Life can seem ultraconvenient when you don’t have to worry about a wad of bills in your pocket (or even a wallet in your pocket, for that matter).

But it can hurt people with low incomes when businesses go cashless, it can hurt workers who rely on cash tips and — even if you’re not in either of these groups — it can hurt you because it’s easy to get into financial trouble with credit cards.

Studies prove that people spend more when using credit vs. cash, and late payments are on the rise.

“You have an out-of-sight, out-of-mind phenomenon with credit cards,” said Amy Bucher, the director of behavior change design at Mad*Pow, a design consultancy group. “Unless they’re checking their credit card balance on a daily basis, most people don’t have an awareness of how much debt they’re in.”

But if used responsibly, credit cards are a fast way to build credit without paying a dime of interest. Good credit scores can save you money down the road, typically qualifying you for lower mortgage or auto loan interest rates. Credit card rewards can make things you buy a little cheaper.

The good news: Mental tricks, apps and tools can make spending with credit cards similar to cash, giving you the best of both worlds.

Editorial note: The assessments of financial products in this article are independently determined by Wirecutter, a New York Times company that reviews and recommends products, and have not been reviewed, approved or otherwise endorsed by any third party.

Make credit card purchases feel tactile
Cash requires you to shop at a physical store, grab your physical wallet and hand over physical money. Giving a cashier a $20 bill in exchange for an $18 item is a tangible transaction. In exchange for a $20, you now have $2 left and a physical bauble.

But a credit card looks the same before and after the transaction, obfuscating what was actually given up for that bauble. Add online shopping to the mix, and you might not even think about your credit card or where the money is coming from.

Grab a receipt. Beverly Harzog, a credit card expert and consumer finance analyst for U.S. News & World Report, always takes a receipt. “It’s just one more thing to help you keep a grip on reality,” she said. “When they ask if you want a receipt, just say yes so you have that feeling of payment in your hand.”

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Remove payment information from your computer. Consumer psychologists refer to creating friction — meaning barriers to doing something — as an effective way to stop an impulse buy. “If you’re sitting on your couch, you’ve had two glasses of wine, you see rain boots on sale, and your credit card information auto-populates, you’re probably going to buy it, because you really only needed to hit two buttons to make that purchase,” Ms. Bucher said. “If you had to get off your couch, pull out your credit card and type in the numbers, that’s friction. You have to commit a little more to make the purchase.” In contrast, digital payments like Apple Pay offer convenience when you’re at the cash register, but they take cash and physical cards out of the equation. If you’re nervous that holding your phone next to the scanner to complete a transaction could turn you into a spendthrift, don’t partake.

[Like what you’re reading? Sign up here for the Smarter Living newsletter to get stories like this (and much more!) delivered straight to your inbox every Monday morning.]

Set spending limits
You can’t buy $300 headphones if your wallet contains only $100. But you can if you’ve got a card with a credit limit over $300 (even if $300 exceeds your budget).

Let robots count your money. Budgeting apps like You Need a Budget ($84 a year) or Mint (no fee) track balances across all your accounts, giving you a clearer picture of your actual balance even if you have multiple cards and accounts from different banks. Some banks, such as Bank of America, also let you sync other accounts, even if those accounts are with competing banks. Check your balance in the app to ensure your next purchase fits your budget.

Try “action planning.” Determine your budget, then implement measures that prevent you from exceeding it. The Uber Credit Card has a feature that lets you create a self-imposed spending limit for certain categories or merchants, which could remove the temptation to stop at Starbucks on the way to work. Other companies, like Discover, allow you to set up alerts if your credit card balance exceeds a certain amount or you near your credit limit.

Section 108 of the Internal Revenue Code Relief of Indebtedness Income and Workouts

Section 108 of the Internal Revenue Code Relief of Indebtedness Income and Workouts

One of the most overlooked areas of the law when doing a workout is Section 108 of the Internal Revenue Code (“IRC”). Section 108 is a trap for the unwary and unless the attorney or lawyer is aware of this tax code section, it can upend a workout or result in a taxpayer having to recognize, report, or pickup unknowingly a significant amount of taxable income. This could ruin the attorney-client relationship or worse yet a malpractice lawsuit by the client against the attorney.

Let's begin this post with an explanation of Section 108 of the IRC.

IRC § 108 provides that if an individual or an entity that owes money (the “Debtor”) is relieved of indebtedness, then that indebtedness is deemed to be ordinary income to the Debtor. The Debtor  must report that income on their tax return and the Creditor is required to file a 1099 with the IRS. There are two exceptions to this rule: first, if the Debtor files for bankruptcy protection, then the relief of indebtedness income is not picked up; and second, on a balance sheet basis, if the individual’s liabilities exceed their assets and they are insolvent, then they do not have to pick up the income.

The goal of a workout from the perspective of the Debtor (the person who owes money) is to pay less than the balance due to the Creditor (person or company owed money).

An example of the application of IRC § 108 will help to explain the above. Let’s assume that an individual owes a financial institution $1,000,000.  The individual is unable to pay the $1,000,000, so the parties enter into a workout (an out of court settlement) in which the individual repays the financial institution $600,000. According to IRC § 108, the taxpayer must pick up the $400,000 differential between what he or she owed and paid as ordinary income.
Unless the client is made aware of this fact in advance of or during a workout, the client may walk away from the workout. If not told at all, when the client receives the 1099 from the Creditor or worse gets audited by the IRS, they will point a finger at the attorney or sue the attorney for malpractice.

Many clients and some lawyers assume that the $400,000 of income is capital gains, but it is ordinary income.

Another question raised by clients is how does the IRS find out about this relief of indebtedness income? The answer is that the Creditor  is required to file a Form 1099-C with the IRS reporting the relief of indebtedness income for more than $600 of forgiven debt.
Yet another question asked by clients is whether the Creditor will file the 1099 with the IRS? The answer is that the Creditor is legally required to do so and most institutional investors will do the 1099 filing.

Section 108 of the IRC comes up in almost every workout, but is currently most prevalent in taxi medallion and restaurant workouts. Both of these industries are struggling and are areas we are doing a lot of workouts.

Clients should review all workouts with their CPA’s or accountants.

At Shenwick & Associates, we are not tax lawyers, but we are familiar with the IRC and James Shenwick has an LLM in Taxation from the NYU School of Law.

Clients who are doing or contemplate doing a workout, are encouraged to consult with James Shenwick to discuss their strategy. Jim Shenwick 212 541 6224  jshenwick@gmail.com

I Paid Off My Student Loans Early, and I Regret It

By: Christy Bieber
From: The Motley Fool
https://www.fool.com/student-loans/paid-off-student-loans-early/

How Uber and Lyft doomed NYC's yellow cab business - New York Daily News

Driving NYC taxis out of business: How Uber and Lyft doomed the once-solid yellow cab industry

By: Clayton Guse

From: nydailynews.com

https://www.nydailynews.com/new-york/ny-medallion-foreclosures-taxi-bailout-plan-uber-lyft-20200130-s2mjkhjubzgptdxasoxddwdote-story.html 

Myth Busted: Turns Out Bankruptcy Can Wipe Out Student Loan Debt After All

From: wamc.org
By: Chris Arnold
https://www.wamc.org/post/myth-busted-turns-out-bankruptcy-can-wipe-out-student-loan-debt-after-all 

Originally published on January 22, 2020 9:31 am

A few years ago, Lauren had a big problem. The Queens, N.Y., resident had graduated from college with an art degree as the Great Recession had hit. She had private student loans with high interest rates. For work, all she could find were retail jobs. And by 2016, her loans had ballooned to about $200,000.
" 'I can't afford to actually pay my bills and eat and pay my rent,' " she remembers thinking. "I was financially handicapped. I mean, my student loan payments were higher than my rent was."
So Lauren started to look into bankruptcy. She doesn't want her last name used because she thinks all this might hurt her job prospects.
Over the years, a myth has taken hold that you can't get student debt reduced or wiped out through bankruptcy. But many bankruptcy judges and legal scholars say that's wrong. And bankruptcy can be a way to get help.
Bankruptcy is not fun. Your credit gets destroyed for years, and you have to be in pretty dire financial straits for it to make sense. But if you reach that point, you can get your debts reduced or erased through bankruptcy so you can get back on your feet.
But the lawyers Lauren called said that with student loans it's different because there are special rules for student debt.
"They had told me things like you have to have a disability where you're not able to even work," she says. "And I was like, 'Well, but that doesn't make any sense.' "
Jason Iuliano, a Villanova University law professor, says that over the past 30 years, Congress has made it harder to discharge student debt. You need to meet what's called an "undue hardship" standard. That also means more work for your lawyer.
But Iuliano says that this has created the misconception that it's nearly impossible to get help for student debt through bankruptcy. That's not true.
Iuliano did some research and says a quarter-million student loan debtors file for bankruptcy each year. They do that because they have credit card debt or other debts and they can get those reduced or erased.
But when it comes to trying to get their student debt forgiven, "more than 99% of the student loan debtors in bankruptcy just give up without even trying," Iuliano says. "It struck me as a really surprising statistic when I first uncovered it."
For those who do try, though, Iuliano's research finds that about half the time the person gets some or all of the student loan debt erased. One study he did found that they got help through bankruptcy about 40% of the time. And he says more recent data from this past year show that figure rising to more than 50% of the time.
"So I think that's really important for bankruptcy attorneys to see that there are judges out there who are willing to grant undue-hardship discharges and that people are much more likely to obtain relief in bankruptcy for their student loan debt," Iuliano says.
Just this month, a federal judge in New York discharged more than $220,000 in student loans for a borrower. In her ruling, Chief Bankruptcy Judge Cecelia Morris criticized the fact that even many lawyers "believe it impossible to discharge student loans." She added, "This Court will not participate in perpetuating these myths."
Robert Lawless, a law professor at the University of Illinois, says, "I think we're reaching a tipping point with what the bankruptcy courts are doing." He says he hopes more people are able to get help through bankruptcy.
But he says the rules are still too restrictive. Lawless researched the issue with a group of attorneys and former judges for the American Bankruptcy Institute, a professional organization. They're recommending that Congress rewrite the rules on student loans in bankruptcy. Under the proposal, Lawless says, "after seven years from when the loans became due, they would be treated pretty much like any other debt in a bankruptcy case."
There is at least some support for that in Congress. Part of the obstacle now is that the current rules often require paying your lawyer more money to attempt to get student debt forgiven.
Lawless says it costs on average about $1,200 to file a typical Chapter 7 bankruptcy case. Bankruptcy attorneys say it can cost thousands of dollars more to pay your lawyer to jump through the extra hoops related to student loan debt, unless you find one who will do that for a reduced rate.
Iuliano says the outcome and how much student debt is forgiven, if any, can have a lot to do with what particular judge you end up with and what the rules are in that bankruptcy district.
Some of that is because of the language of the original statute stating that student loan borrowers have to meet a threshold of "undue hardship," he says. Iuliano says Congress has never defined what that means, so a lot of discretion is left up to the courts and the particular judge you get.
Harrison Wadsworth, a consultant for the Consumer Bankers Association, notes that most student loans are issued by the government. But for loans from private lenders, he says relaxing the bankruptcy rules to make it easier to reduce or eliminate student debt could push up interest rates. "Lenders would have to be careful about making loans and probably have to charge more for them," Wadsworth says.
Lauren eventually found a lawyer who took her case and charged her about $3,000, doing some of the work pro bono. And going through bankruptcy, she got her debt reduced from about $200,000 to around $100,000, with the bulk of that reduced to a 1% interest rate.
"It's still a lot of money," she says. But she says, "I was extremely relieved."
Lauren says it is significantly less than she owed before. And she says the payments are manageable.
"And because they lowered the interest, I'm actually paying off the loan," she says. So she says she can recover financially, which Lawless says is what bankruptcy is there for.

Copyright 2020 NPR. To see more, visit https://www.npr.org.

DAVID GREENE, HOST:
Many Americans who get overwhelmed by student loan debt are told bankruptcy is not an option for them because you can't get student debt reduced or wiped out through bankruptcy. Well, now more judges and legal scholars are saying that's a myth, and bankruptcy can be a way to help. Some advocates want Congress to act to change the laws so student debt is treated the same as any other kind of debt. Here's more from NPR's Chris Arnold.
CHRIS ARNOLD, BYLINE: A few years ago, Lauren (ph), who lives in Queens, N.Y., had a big problem. She graduated college with an art degree just as the Great Recession hit. She had private student loans with very high interest rates. For work, all she could find were retail jobs. And by 2016, her loans had ballooned to about $200,000. She remembers thinking...
LAUREN: I can't afford to actually pay my bills and eat and pay my rent. Basically, I was financially handicapped. I mean, my student loan payments were higher than my rent was.
ARNOLD: So Lauren started to look into bankruptcy. She doesn't want to use her last name because she thinks all this might hurt her job prospects.
Now, bankruptcy is not fun. Your credit gets destroyed for years, and you have to be in pretty dire financial straits for it to even make sense, but you can get your debts reduced or erased so that you can survive and get back on your feet. But the lawyers that Lauren called said, look; basically, with student loans, it's different.
LAUREN: They had told me things like you have to have a disability where you're not able to even work. And I was like, well, but that doesn't make any sense.
ARNOLD: Many bankruptcy judges and legal scholars agree. Jason Iuliano is a law professor at Villanova University. He says over the past 30 years, Congress has made it harder to discharge student debt. You need to meet what's called an undue hardship standard. That also means more work for your lawyer. But he says that's created this misperception that it's nearly impossible to get help for student loan debt through bankruptcy. Iuliano did some research, and...
JASON IULIANO: What struck me as a really surprising statistic when I first uncovered it - there is a quarter of a million student loan debtors who file bankruptcy each year.
ARNOLD: They do that because they have credit card debt or other debts, and they can get those reduced or erased. But trying to get their student debt forgiven...
IULIANO: More than 99% of the student loan debtors in bankruptcy just give up without even trying.
ARNOLD: But he's also found that when people do try and they pay a lawyer to jump through the extra hoops, about half the time, the person gets some or all of their student loan debt erased.
IULIANO: So I think that's really important for bankruptcy attorneys to see that there are judges out there who are willing to grant undue hardship discharges and that people are much more likely to obtain relief in bankruptcy for their student loan debt.
ARNOLD: Just this month, a judge in New York discharged $220,000 in student loan debt for a borrower. And in her ruling, she criticized the fact that even many lawyers, quote, "believe it impossible to discharge student loans." She added, quote, "this court will not participate in perpetuating these myths."
ROBERT LAWLESS: Well, I think we're reaching a tipping point with what the bankruptcy courts are doing.
ARNOLD: That's Robert Lawless, a law professor at the University of Illinois. He hopes that more people are able to get help through bankruptcy, but he says the rules are still too restrictive. He took part in research on the issue for the professional organization the American Bankruptcy Institute, which recommends...
LAWLESS: That Congress rewrite the rules on student loans and bankruptcy and make it so after seven years from when the loans became due, they would be treated pretty much like any other debt in a bankruptcy case.
ARNOLD: There is at least some support for that in Congress.
Harrison Wadsworth is a consultant for the Consumer Bankers Association. He says most student loans are issued by the government these days, but for loans from private lenders, loosening the rules could push up interest rates.
HARRISON WADSWORTH: Lenders have to be more careful about making loans and probably have to charge more for them.
ARNOLD: In Lauren's case, she eventually found a lawyer and, going through bankruptcy, she got her debt reduced from around $200,000 down to around $100,000, and the bulk of that at a 1% interest rate.
LAUREN: It's still a lot of money (laughter).
ARNOLD: Yeah.
LAUREN: Yeah. So for me, like, I was extremely relieved. It is significantly less, and I'm actually able to, like, make the payment. And because they lowered the interest, I'm actually paying off the loan.
ARNOLD: So Lauren says she can recover financially, which, Lawless says, is what bankruptcy is there for.
Chris Arnold, NPR News. Transcript provided by NPR, Copyright NPR.

Organizing at Work

This week we heard from Dan Loya at Spaces Transformed.  Dan gave a talk and a couple of comments that I had on this  important topic are below:

1. Dan did not mention this app for  note taking, but many experts, tech people and tech websites state that “Google Keep” is the best note taking app. I have used this app for about five years and I'm extremely happy with it and I would suggest that everyone in the group try it. It is free, easy to use and learn, is available for  Android, Apple  and on your Windows computer and it  syncs instantly to all of your devices
2 For my To Do list, I have probably tried 10 apps over the years and have stopped using them after two to three weeks. I believe that the best note taking app is an eight and ½  by 11 legal pad or a 4 by 6 legal pad. What are the benefits of a pen and paper? We all know how to read and write, you can use different ink colors and you can highlight your to-do list, throw it out when it is completed and. it is also a multi-platform device in that you can take it home at night or on the weekend by throwing it in your back. I have found that I need to 2   to-do lists, one for my personal use and one for work.
3. Organizing your emails.  I would suggest the following approach using Outlook 365. Outlook 365 contain something called “Categories” at the ribbon at the top of the program, and categories allows you to color code your emails. As my emails come in, I color them purple- high priority work matters, red-for work matters, yellow- for personal, orange for higher-level personal, blue for an item that needs to be purchased, green for billing, accounts receivable and money related issues and brown for work matters. Categories also allows you to use two colors and in my system I use “purple red” for urgent client related work matters and they get my highest priority. The beauty of this system is that it organizes your emails by category and by need and it allows you to direct your time and focus to your highest priority matters, which are in my case purple red.
 Before I take a break, after I come back from  a meeting or Court and before I leave to go home I always try and make sure that my “Purple Red” emails are addressed.
The system is easy to use, free and very intuitive!
Finally, every 7 to 10 days, I try to achieve something called “Inbox Zero” and then I put a smile on my face.  Inbox Zero means that I delete every email that is still in my  Inbox and then smile because I have uncluttered my emails and simplified my work space.
This approach forces me to evaluate every email as it comes into my In Box,  I either act on the email, color code it for later use or delete it. Give this approach a try it works. Jim Shenwick  jshenwick@gmail.com

Bailout Up to $500 Million Proposed for Taxi Drivers Trapped in Loans New York Times 1/16/20

Bailout Up to $500 Million Proposed for Taxi Drivers Trapped in Loans

The proposal is the most far-reaching step taken in response to a Times investigation into exploitative practices in the industry.


New York Times Article
Bailout Up to $500 Million Proposed for Taxi Drivers

A high-level New York City panel appointed by Mayor Bill de Blasio and other officials intends to propose a bailout for thousands of taxi drivers trapped in exploitative loans that could cost as much as $500 million, several panel members said this week.

The panel, which has been meeting regularly since last summer, wants a new public-private partnership to essentially absorb much of the debt that the drivers took on in recent years in order to buy medallions, the city-issued permits that let them own cabs. Many of the medallions were sold at artificially inflated prices by industry leaders who brought about one of the biggest speculative loan bubbles since the American financial crisis.

The drivers, nearly all of whom are immigrants, were channeled into reckless loans totaling billions of dollars, leaving many bankrupt and struggling to survive.

The proposal would call for the partnership to buy medallion loans at discounted prices and ease the burden on borrowers by forgiving much of the debt and lowering interest payments, panel members said.

Officials cautioned that they were still working out the details of the proposal. Mr. de Blasio has not indicated whether he would support it. In the past, he has expressed skepticism about a city-funded bailout. His office said this week it would review the panel’s recommendations after they are finalized.

Corey Johnson, the City Council speaker, who appointed most of the panel’s members, said on Wednesday that its emerging plan was an important milestone, an indication that he was open to spending a significant amount of city money to help drivers.

“We know that folks in this industry have suffered tremendously,” Mr. Johnson said. “I’m really excited that after six months of painstaking work and effort, the task force is going to be releasing a variety of recommendations that we think could stabilize the industry, plan for the future and help alleviate the suffering.”

Some panel members said the partnership would aim to raise up to $500 million, while others, including leaders of the City Council, said the numbers were still being finalized and the report would not list any amounts. The city might have to contribute a portion of the total, but most of the money would come from private donors. Investors could receive incentives for contributing to the fund and would earn a return on the loans.

The 19-member panel, which is headed by two powerful members of the Council, is set to release a report with the proposal this month.

Even with the mayor’s backing, organizers would have to raise money and convince lenders to sell loans. One issue is that the National Credit Union Administration, a federal agency that is now the largest holder of taxi medallion loans, is already considering selling off its loans to for-profit debt collectors and others who are unlikely to give borrowers a break.

Bhairavi Desai, founder of the Taxi Workers Alliance, a group of drivers, who is on the panel, expressed confidence in the plan.

“This is the most optimistic I have ever felt about solving this crisis,” said Ms. Desai, adding that several donors have already expressed interest.

“We’re going to win,” she said.

The proposal would be the most far-reaching step taken so far in response to a New York Times investigation that revealed more than a decade of exploitative practices in the industry.

The Times found that a group of industry leaders artificially inflated the price of a medallion to more than $1 million from about $200,000, channeled immigrant drivers into reckless loans to purchase medallions and extracted hundreds of millions of dollars before the bubble burst.

The practices set off a crisis that has been intensified by the arrival of ride-hailing companies such as Uber and Lyft. The new apps have reduced the revenue that yellow cabs receive, but virtually all of the hundreds of industry veterans interviewed by The Times said the bubble would have burst even if ride-hailing had never been invented.

Taxi industry leaders have denied wrongdoing, describing their tactics as normal business practices and noting that regulators approved their methods. They have blamed the industry’s financial crisis exclusively on Uber and Lyft.

Negotiations a Primer

Negotiations a Primer 

As many of our clients and colleagues know, at Shenwick & Associates we do a lot of negotiating and to date we have had many successes.

First, client’s ask what is an “out-of-court” settlement? An out-of-court settlement is a settlement that is obtained without Court intervention and without the use of a mediator or an arbitrator. Simply stated, an out-of-court workout is a negotiation between a party that owes money ( a debtor) and a party who is owed money ( a creditor).  The benefit of an out-of-court negotiation is that they can be cheaper, quicker and more effective than litigation, mediation or arbitration.

People often ask what is the secret of our success or the “secret sauce”? 

Provided below is a “blueprint” that we use in negotiating. 

1. Preparation, preparation and more preparation! Many attorneys believe that since they do not need to draft a motion or file a legal brief, in a negotiation, all they need to do is pick up the phone and call their adversary and begin talking. Experience has taught us that nothing could be further from the truth. Prior to commencing a negotiation, a lawyer should engage in extensive fact gathering or due diligence, gathering as much information as they can from various sources about their adversary, counsel for their adversary and the nature of the conflict. 

For example, is the dispute related to a divorce where inflicting pain is more important than the dollars involved in the case? Does the dispute involve former partners one or both who may feel that a trust was breached as well as money being owed? 

If you skip the preparation step you are shortchanging your client and undermining your chance of success in the negotiation. At Shenwick & Associates we have developed a “negotiation worksheet” which we complete before we commence any negotiation.

Additionally, during the preparation step an attorney should formulate their strategy or tactics for the negotiation. 

2.                  Before we pick up the phone and call our adversary to begin the negotiation, we also review our client’s assets and liabilities and we engage in asset protection planning, to the extent possible (consistent with the law). Very simply we want to make sure that the client’s property and assets are protected as much as possible from creditor collection actions if the negotiations fail.

3.                  We also advise our client that in every negotiation there are two adversaries, our opponent and the “clock”. Timing is crucial in many negotiations and the pace and timing of a negotiation can often affect the outcome or be the difference between success or failure. 

If a client is anxious for a negotiation to be concluded quickly, oftentimes they will concede points and end up on the losing side of a negotiation, rather than allowing a professional to determine the pace of the negotiations. For example, does the negotiation involves a foreclosure (with a fixed day for the judgment of foreclosure), or is it a garden-variety debtor-creditor dispute where litigation has not yet been commenced and there are no deadlines pending?

4.                  We then commence the negotiation and negotiate aggressively on our client's behalf. As an experienced bankruptcy attorney (having filed hundreds of cases), we will often advise our adversary that if there is no settlement, our client will consider a bankruptcy filing and we will advise our adversary on what their likely recovery will be if a bankruptcy case is filed. This factor alone can often times affect the outcome of a negotiation. 

5.                  Also remember to consider the tax consequences of a settlement and specifically section 108 of the Internal Revenue Code.  “Relief of indebtedness” income can be taxable income and that issue must be discussed with the client and factored into the settlement. James Shenwick, Esq. has an LLM in Taxation from New York University Law School and is very familiar with this issue. 

Finally, while there is no guarantee of success, our 20 plus years of negotiating for clients has shown that using the above “blueprint” will often result in a successful outcome for a client. Client’s or attorneys who have questions about negotiations or negotiation strategy are welcome to contact Jim Shenwick at 212-541-6224 or jshenwick@gmail.com

Student Loan Discharge may have just gotten easier based in Judge Morris decision in Southern District of New York

This Man Got $221,000 Of Student Loans Discharged In Bankruptcy

Zack FriedmanSenior Contributor 

Personal Finance

Author, The Lemonade Life. I write about leadership and greatness.

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Can you now discharge your student loans in bankruptcy?

Here’s what you need to know.

Student Loans: Bankruptcy

A Navy veteran will have $220,000 of his student loans discharged, even though he is not unemployable, not disabled or wasn’t defrauded. A U.S. bankruptcy judge in New York, Cecilia G. Morris, ruled that Kevin J. Rosenberg will not have to repay his student loan debt because it will impose an undue financial hardship.

According the Wall Street Journal, Rosenberg borrowed $116,500 of student loans between 1993 and 2004 to earn a bachelor’s degree from the University of Arizona and a law degree from Cardozo Law School at Yeshiva University. He filed for Chapter 7 bankruptcy in 2018 and asked the court last June to discharge his student loan debt, which had grown to $221,400, including interest. At the time of filing, Rosenberg’s annual salary was $37,600, and after living and debt expenses, his monthly net loss was $1,500.

Traditionally, unlike mortgages or credit card debt, student loans cannot be discharged in bankruptcy. There are exceptions, however, namely if certain conditions regarding financial hardship are met.

Today In: Money

The Brunner Test: Financial Hardship

Those conditions are reflected in the Brunner test, which is the legal test in all circuit courts, except the 8th circuit and 1st circuit. The 8th circuit uses a totality of circumstances, which is similar to Brunner, while the 1st circuit has yet to declare a standard.

PROMOTED

In plain English, the Brunner standard says:

1. the borrower has extenuating circumstances creating a hardship;
2. those circumstances are likely to continue for a term of the loan; and
3. the borrower has made good faith attempts to repay the loan. (The borrower does not actually have to make payments, but merely attempt to make payments - such as try to find a workable payment plan.)

There are variances across federal districts, but that’s the basic framework. To discharge student loans through bankruptcy, an Adversary Proceeding (a lawsuit within bankruptcy court) must be filed, where a debtor claims that paying the student loan would create an undue hardship for the debtor.

So, Can You Now Discharge Student Loans In Bankruptcy?

This is only one legal ruling. That said, federal judges and Democrat and Republican members of Congress are open to changing the law to make it easier for borrowers to discharge their student loans in bankruptcy. While these tactics may be welcomed by some student loan borrowers, critics may question whether judges should actively try to circumvent the existing law (suggesting that Congress, and not judges, should make the law).

Bankruptcy would be easier option for consumers under Warren's plan

From: cnbc.com
By: Sarah O'Brien
 https://www.cnbc.com/2020/01/07/bankruptcy-would-be-easier-option-for-consumers-under-warren-plan.html

Shenwick & Associates website

Visit our new website at: https://sites.google.com/site/jshenwick/home

Retirees owe $30,000 or more in student loans

Why student loan debt is ballooning for those 50 and up

From: USAToday.com

By: Susan Tompor  Detroit Free Press

https://www.usatoday.com/story/money/2019/12/29/retirees-student-loans-debt/2769065001/

Abating (remove or eliminate) IRS Tax Penalties

Many clients have contacted us regarding the discharge of taxes in bankruptcy,
offers in compromise and installment agreements with IRS and recently  penalties
assessed by IRS.

The IRS offers 3 types of penalty relief:

1. Reasonable Cause-this appears to be our best chance  to abate penalties
2. Administrative Waiver and First Time Penalty Abatement
3. Statutory Exception for example a taxpayer  got bad advice from IRS


Reasonable cause is relief we may grant when a taxpayer exercises ordinary business care and prudence in determining
their tax obligations but is unable to comply with those obligations due to circumstances beyond their control.

Reasonable Cause is based on all the facts and circumstances in your situation. 
The IRS will consider any reason which establishes that you used all ordinary business care and prudence to meet your
Federal tax obligations but were nevertheless unable to do so.

Typical fact patterns involving reasonable cause for failure to file a tax return, make a deposit, or pay tax when due include:

1. Fire, casualty, natural disaster or other disturbances
2. Inability to obtain records
3. Death, serious illness, incapacitation or unavoidable absence of the taxpayer or a member of the taxpayer’s immediate family

Jim Shenwick, Esq. has an LLM in Taxation from New York University Law School

The Epic Rise and Hard Fall of New York's Taxi King from the New York Time

The Epic Rise and Hard Fall of New
York's Taxi King
By Brian M. Rosenthal
.
Dec. 5, 2019

Evgeny A. Freidman in his garage in Long Island City, Queens. Sasha Maslov
The man known as the Taxi King arrived at his 2014 holiday party in a $384,000 Ferrari, wearing a custom Italian suit. He told the guests
whom he had invited to an upscale Manhattan club - including executives, politicians and celebrities - that he had flown in from SaintJean-
Cap-Ferrat, a town in the French Riviera where he owned two villas.
Five years later, that man, Evgeny A. Freidman, stood in a mostly empty courtroom in Albany, N.Y., as a judge sentenced him to probation
for tax fraud. In a hushed voice, he said he had lost everything.
"I'm trying to be remorseful and understanding for anybody I might have harmed;' he told the judge at the hearing in October. "I'm very
humbled by what has happened."
For more than a decade, New York taxi industry leaders got rich by creating a bubble in the market for the city permits, known as
medallions, that allow people to own and operate cabs.
In several articles this year, an mvest1gat10n by I he New York limes found that government officials stood by as mdustry leaders
artmciio~tiji\laAe~~$Uiffia§atr!d5:hanneled immigrant drivers into loans they could not afford to purchase the permits. The lea(iers
reaped hundreds of millions of dollars before the bubble burst, wiping out thousands of buyers who are still mired in debt today.

And no one embodies the glittery rise, unfettered recklessness and spectacular collapse of the industry more than Mr. Freidman.

A Russian immigrant and a cabdriver's son who got his nickname by building the city's biggest fleet, Mr. Freidman was a primary
architect of some of the tactics used to build the bubble, according to records and interviews. At the height of the market, he had
accumulated $525 million in assets. He befriended the filmmaker Spike Lee, the baseball star Mo Vaughn and Mayor Bill de Blasio. His
outsize antics and lavish spending often landed him on Page Six, the New York Post's gossip column.
As a generation of cabdrivers became trapped in overwhelming debt, Mr. Freidman created offshore trusts that protected some of his
money when the bubble burst, records show. While his business partners lost millions because of his tax fraud, Mr. Freidman avoided
prison by cooperating with a federal investigation into one of his partners, Michael D. Cohen, President Trump's former lawyer.
"He hurt so many people in so many different ways;' said David Pollack, the former head of the Committee for Taxi Safety, an association
of fleet owners that once included Mr. Freidman. "Your headline could be: 'The man who brought down the taxi industry.'"
Mr. Freidman did not respond to repeated requests for comment. Government officials declined to answers questions on why they did not
intervene sooner.
This account is based on interviews with more than 20 of Mr. Freidman's former associates and a review of thousands of pages of court
records and other documents.
Mr. Freidman is now cooperating with prosecutors who started investigating the taxi industry after The Times published its series this
year on the exploitative tactics that drove medallion prices to soar past $1 million by 2014 from $200,000 in 2002. He has met with them
three times so far.
'I'm in , you 'r e out'
Mr. Freidman, 49, who is known as Gene, likes to portray himself as a scrappy fighter who rose from first-generation immigrant to
multimillionaire solely through his wits and fists.
But like everything involving Mr. Freidman, the reality is more complicated.
He was born in St. Petersburg, Russia, in 1970, an only child. Six years later, his family emigrated to New York, he has said in interviews.
His father, who Mr. Freidman said had been a thermonuclear engineer, got a job as a cabdriver but soon began buying medallions and
building a fleet, records show.
Mr. Freidman attended the Bronx High School of Science, Skidmore College and Cardozo Law School. Afterward, he has said, he moved to
Russia to work in private investing.
Mr. Freidman has said in speeches that he returned to the United States in 1996 at the request of his father, who had become a successful
and respected fleet owner. During the flight home, he crafted a plan to use what he learned in Russia to revolutionize the taxi industry.
His idea was straightforward: He wanted the industry to take more risks to increase profits.
Specifically, Mr. Freidman has said he wanted lenders to allow medallion purchasers to borrow more money, with smaller down payments
and longer repayment periods. Former associates said he believed this strategy would allow him and others to buy more medallions,
enable lenders to increase profits and, mostly, drive up medallion values. He believed that would spur more purchases, more loans, more
profits and even higher medallion values.
"I walked in and took over;' he later recalled. "I told my dad, 'I'm in, you're out.'"
Prominent - and polarizing
Mr. Freidman was 26. He was cocky, but he needed help. He turned to the small nonprofit that had lent to his father, Progressive Credit
Union, and its chief executive, who had become a family friend, Robert Familant.
Between 1997 and 2004, Progressive's loans enabled Mr. Freidman to buy about 100 medallions to expand his fleet, according to city
records and former associates.
At the same time, Mr. Freidman became a licensed broker and helped some drivers purchase medallions, mostly using loans from

Other industry leaders used similar tactics. But few were as aggressive as Mr. Freidman.
More Mr Freidman's success emboldened others, and helped encourage lenders to push low-income
drivers to take on massive loans to buy medallions.

"He changed the market:' said Ira Goldstein, a former chief of staff at the city commission that oversees the industry. "People copied him,
and it affected everybody, including the driver-owners."
Mr. Familant did not respond to requests for comment.
As Mr. Freidman expanded his fleet, he became increasingly prominent - and polarizing.
To his allies, Mr. Freidman was charming and passionate, with a perspective that improved a long-stagnant industry. He put his fleet in
several neighborhoods, making it more accessible for his drivers. He worked long hours. He embraced energy efficiency, becoming the
first to use hybrid cabs.
Others saw him as vindictive and vulgar. Lawsuits have accused him of cheating his drivers, clients and partners. Last year, he was
ordered to pay $1.3 million to an assistant who sued him for sexual harassment. On his desk, he kept a snow globe sprouting a middle
finger.
The highest bidder
Mr. Freidman unleashed his most radical idea on June 16, 2006, at an auction where the city sold new medallions.
At the time, a medallion cost $350,000 on the private market, according to a Times analysis. But at the auction, Mr. Freidman and his
associates bid $477,666.50 apiece.
They won all 54 medallions sold.
The results reshaped the small medallion market. In effect, Mr. Freidman single-handedly had increased the value of all medallions,
including ones he had owned for years - and also increased prices for everyone, making it harder for drivers to buy without enormous
loans.
Years later, Mr. Freidman admitted he had intentionally overpaid to inflate the values of medallions he owned. He said in a 2012 speech
that he used the values to persuade lenders to loan him more money.
"I would bid crazy prices. People would look at me like I'm crazy, and I wouldn't care:' he said, "because I would look at the prices and say,
'This is market value."'
Mr. Freidman repeated the strategy at three other auctions, records show. In all, he bought more medallions at auctions than anyone else
in city history.
Riches and power
The medallion bubble turned Mr. Freidman into a remarkably rich man.
His fleet had about 900 of the city's 13,587 medallions. Most were owned by others who charged him a fee for the right to operate their cabs
and keep the profits. He personally owned about 250 permits, and at the height of the market, each was worth $1.3 million, although they
were mortgaged, records show.
Mr. Freidman knew the prices would not last, according to five former associates. So he used the medallions as collateral to borrow money
that he invested elsewhere.
He bought 20 commercial properties, records show. He opened locations of a French whimsical pajama store in New York, Arizona,
California, Georgia and Washington state. He acquired medallions in Chicago and Philadelphia, helping to spike prices in those cities.
He bought a 4,000-square-foot townhouse on Manhattan's Upper East Side, an estate in the Hamptons and a condo in Chicago, in addition
to the French villas.
He also invested in politics. He donated to former Representative Anthony Weiner's 2013 mayoral campaign and to Mr. de Blasio. Later, he
bragged to associates that Mr. de Blasio placed one of his friends at the taxi commission.
Mayoral spokeswoman Freddi Goldstein rejected that notion. "Any suggestion that we hired anyone at his request is a blatant lie;• She said that "The mayor ceased contact with Gene Freidman as soon as he realized he was a bad guy."

Mr. Freidman also began managing Mr. Cohen's medallions. They became friends; during Mr. Freidman's divorce.

Several of Mr. Freidman's former associates said as he became wealthier, he stopped paying his debts.

During the bubble, when Mr. Freidman was worth millions, he was sued or otherwise accused of failing to fully pay his drivers, employees,
clients, partners, lawyers, contractors, landlords, lenders, an accountant and a car dealer as well as child support payments, association
dues, insurance premiums and taxes.
Between 2013 and 2016, the state ordered him to pay nearly $1.5 million for cheating drivers. But he has failed to fulfill that order, too,
records show.
The aftermath
Now that the bubble has burst, Mr. Freidman is awash in lawsuits and eviction notices.
A judge ruled in 2016 that he transferred more than $60 million into trusts in Belize, Nevis and the Cook Islands in order to avoid paying
creditors. Mr. Freidman had defended the transfers as part of estate planning. "It is impossible to conclude that the timing of the transfers
is merely coincidence;' the judge wrote in ordering the trusts to pay the creditors.
The tax fraud case, filed in 2017, involved two surcharges collected by cabs that Mr. Freidman owned and ones he managed for others: a
50-cent fee for regional transit improvements, and a 30-cent fee for more wheelchair-accessible taxis.
Officials initially accused Mr. Freidman of pocketing more than $30 million.
But after agreeing to cooperate against Mr. Cohen, he ultimately repaid $1 million to the state and $826,000 to the city. In addition to five
years of probation, he had to exit the industry and authorize officials to seek $4 million more in the future. (Mr. Cohen is now serving a
three-year sentence for campaign finance violations and other crimes.)
"He no longer has any involvement whatsoever in taxi operations in New York City. He's done;• said Allan J. Fromberg, a spokesman for
the city Taxi and Limousine Commission.
The city and the state have also demanded millions from the owners who entrusted medallions to Mr. Freidman's fleet, even though they
did not know about the scheme or benefit from it. The taxi commission did not respond to questions about the collections. The state
attorney general's office, which prosecuted the tax fraud case, declined to comment, citing its ongoing investigation into the industry.
"It's unbelievable;' said one owner, Robert Rosen, 72.
Mr. Rosen, who said he committed his medallion to Mr. Freidman because he knew his father, lost $30,000. "The things the government
has let this crook get away with. It's shocking!'
Susan Beachy contributed research.

A new law may fix student loan debt when filing for bankruptcy

It's almost impossible to get rid of student loan debt when filing for bankruptcy, but help may be on the way
From: Business Insider
By: Mike Brown,LendEDU
https://www.businessinsider.com/loan-debt-student-borrowers-bankrupcy-relief-act-2019-11

Taxi medallion owners win class-action status as reported in Cranes New York Business

"A lawsuit charging that the city sold 400 taxi medallions under false pretenses about their worth and then breached its contract by letting ride-hail operators enter the market and undermine medallion values has been certified as a class-action suit.

The suit, brought by five medallion owners and filed in early October, could now apply to more than 150 medallion owners, according to Daniel Ackman, one of the lawyers for the plaintiffs. The decision in State Supreme Court in Queens County was delivered late last week.

The disputed medallions were bought at three auctions held by the Taxi and Limousine Commission in 2013 and early 2014—when prices were still astronomically high and Uber had barely dented the market. The sales netted the city $360 million.

 Mystery buyer snaps up taxi medallions as prices fall further
 Judge rules on taxi industry lawsuit: Compete with Uber or die
 Cab drivers and owners get caught in the headlights of a troubled taxi lender
Ackman is asking for the city to take back the medallions from the auction winners and return the $360 million they paid for them. The medallions' prices ranged between $803,000 and $965,000 for independent medallions and $1.025 million and $1.259 million for corporate medallions, according to the suit.

Medallions are currently selling at private auctions for less than $150,000 apiece.

"Not once before the Auctions did the City warn prospective buyers that it was about to radically change the economics of the taxi industry by allowing a massive influx of new for-hire vehicles—principally cars hailed through electronic apps—that would decimate the value of the yellow taxi medallions," attorneys write in the suit. "Nor did the TLC disclose that it would license the e-hail taxis as “black cars” despite the fact that they did not qualify for these licenses. Instead, Defendants omitted this information which, had it been known, would have dissuaded potential Auction bidders."

Both the city and the plaintiffs have asked the court for summary judgment.

The city's law department and the Taxi and Limousine Commission did not respond immediately to a request for comment.

But in a related suit brought by Ackman that is currently before the same court, the city has argued that in its contracts with the medallion owners it made no claims "as to the present or future value of a medallion, or the present or future application of TLC rules."

The city also noted that the contracts did not imply an "obligation to protect [the medallion purchasers] from competition from app-based companies such as Uber, when their contracts explicitly said otherwise, and when Uber was already operating in the market at the time of their purchases."

A private-equity firm buying up taxi medallions could take on Lyft and Uber
The city and the TLC have a good record defending themselves from the claims of medallion owners who blame them for the plunge in medallion values. In one noted case in Queens Supreme Court in 2015, a judge ruled that an e-hail was a prearranged ride--essentially what black car services have always provided--and did not conflict with medallion owners' street-hail privileges.

Ackman maintains that his case is narrower than earlier suits, applying only to medallion owners who bought the assets directly from the city, and centers on the contractual relationship between them. It is also coming at a time when there is wider recognition of the hardships medallion owners have faced--highlighted by multiple suicides--and more interest among elected officials in taking steps to help them.

A favorable ruling "could have implications beyond this case," Ackman said. "It's possible if a judge says, 'Yes, the city's conduct destroyed the value of the medallions,' that could spur other actions by the city or the state.""

Student Borrower Bankruptcy Relief Act of 2019

MISSOURI CONGRESSMAN CLAY INTRODUCES STUDENT LOAN DEBT REFORM PACKAGE

Congressman Wm. Lacy Clay (D) Missouri has introduced two new bills to tackle America’s student loan debt crisis.

From: blackstarnews.com

http://www.blackstarnews.com/education/education/missouri-congressman-clay-introduces-student-loan-debt-reform 

The Failed or Closed Restaurant and its Lease

Continuing our blog posts about failed or closed restaurants,
when client’s contact us about a failed or closed restaurant, we
ask them to prepare and bring us an Income Statement and a Balance
Sheet for the restaurant.

The purpose of the Income Statement or Profit and Loss Statement is to
show the revenue and expenses for the restaurant for the current year and
to determine the profitability of the restaurant, if any.

The purpose of the Balance Sheet is to determine what money or property is
owed by the restaurant (liabilities), such as back rent to the Landlord,
sales tax, wages due to employees or money owed to suppliers.
We also want to know what property or assets the restaurant has to
satisfy the claims of creditors.

In our experience of representing  failed or closed restaurants, a couple of
 facts become apparent:

Restaurants have little to no inventory, the perishable goods must be used or
 thrown out.
-The accounts receivable are generally credit card based and collected by the
restaurant in 5 to 20 days
-The  used pots, pans and knives have little value
- Fixtures or property attached to the walls or the floor belong to the Landlord and
-The bar stools, tables and other property is generally auctioned off by the restaurant
owner  in a going out of business sale or sold by an auctioneer for 10 to 15 cents on the dollar.

There is however one asset that is often overlooked by restaurant owner and that is the lease. 
The lease needs to be reviewed to determine if the rent is below market, at market or above
market and how many years are left on the lease (the term).

A lease with less than three years remaining on its term, generally has little to no value.

Simerly a lease that is at market or over market generally has no value.
However an “under market” lease with 3 or more years on its term, 
may have a significant value.

The approach that we suggest for the under market lease  is that the assignment and
sublet provisions of the lease be reviewed, then the restaurant owner should contact
the landlord and indicate that they are considering closing their business and they
would like to assign or sublet the lease to a third party or have the landlord “by them out”
out their lease.

The restaurant owner with an under market lease, may want to contemplate hiring a
real estate broker to review the lease, to negotiate with the landlord and to market 
the lease to third parties.

The general standard in New York for the approval of an assignment or sublet of a
lease by a tenant is known as “not unreasonably withheld”. In plain English what
this means is that if a tenant finds a suitable party, that wants to take over the lease,
the landlord must be “reasonable” in approving or not approving /consenting to an
assignment of the lease or the Landlord can be sued.

The Landlord will want the lease to be sublet to a third party and not assigned, so that
the landlord will have recourse against the existing restaurant owner and the new
 restaurant tenant. If the restaurant lease is able to be assigned or sublet, then the 
tenant’s security deposit (which generally is two to three months of rent) will be
preserved and ultimately returned to the restaurant owner.

That money (sublet money & security deposit) can often times create a significant
amount of money, that can be used to pay creditors, such as sales tax, or monies due
the landlord that are guaranteed by the restaurant owner.

A number of issues related to failed or closed restaurants have been discussed in prior blog posts.
Clients with failed or closed restaurants, that have questions regarding the closing of the restaurant,
or a bankruptcy filing by the restaurant or restaurant owner or a sublet or assignment of the lease
should contact Jim shenwick at 212-541-6224 or at jshenwick@gmail.com.
Jim Shenwick has experience in workouts, bankruptcy filings and office leasing. 

Judge tosses Uber lawsuit against NYC’s for-hire vehicle cap

From: ny.curbed.com
By: Valeria Ricciulli
https://ny.curbed.com/2019/11/1/20944015/uber-nyc-taxi-limousine-commission-lawsuit

NYC Cabbies Say ‘No-Cost’ Bailout Would Avoid Financial Ruin

From: bloomberg.com
By: Henry Goldman
https://www.bloomberg.com/news/articles/2019-10-11/nyc-cabbies-say-no-cost-bailout-would-avoid-financial-ruin

How New York’s Taxi Titans Roiled Cities Hundreds of Miles Away

From: nytimes.com
By: Azi Paybarah
https://www.nytimes.com/2019/10/07/nyregion/nyc-taxis.html

‘We Were Wiped Out’: New Yorkers Preyed on Chicago Cabbies

From: nytimes.com
By: Brian M. Rosenthal
https://www.nytimes.com/2019/10/04/nyregion/taxi-medallions-chicago.html

The Closed Restaurant and Guarantees and Good Guy Guarantee of the Restaurant Lease

In our continuing series of posts on failed or closed restaurants, many clients have asked us to review the custom 

and practice and the law regarding guarantees and  good guy guarantees for restaurant leases.

 Most restaurants in New York are owned by a limited liability company (“LLC”) or a Subchapter S corporation. 

That entity will set up and run the restaurant and the LLC  or S corporation stock will be owned by an  individual.

 In negotiating the restaurant lease, all Landlords will require that the owner of the LLC  or the S corporation 

guarantee the lease.

There are two types of lease guarantees in New York. A full or complete Guarantee for the payment of  rent or 

additional rent by the restaurant under the lease. Under this type of Guarantee, if a restaurant fails to make

lease payments for 6 months  or any period of time and owes $50,000 for  rent and additional rent  under the lease 

and these monies are not paid by the restaurant, the Landlord can demand that the guarantor pay those monies and if 

payment is not made, the Landlord can  sue the individual that owns the restaurant/guarantor for that sum of money. 

This is an example of an unconditional or unlimited guarantee by the restaurant owner to the Landlord.

 The second type of guarantee is what is known as a “Good Guy Guarantee (“GGG”)”, which is a specialized type of guarantee 

which limits the payment  of the guarantor under  the restaurant lease, if certain conditions enumerated in the GGG are met.  

If the restaurant performs those conditions, the guarantor is released from its  obligations under the Lease. 

An example is provided below. 

Example, many GGG require that the following conditions be performed by the restaurant in order for the GGG clause 

to come into effect and to limit the restaurant owners exposure to the Landlord for future rent. 1.  the restaurant  

must be current on its payment of rent and additional rent, when the GGG sends a letter to the landlord indicating that 

the restaurant is closing, 2 . written notice must be given to the Landlord (as specified in the lease) regarding the 

date of the  closing of the restaurant a certain number of days in advance of the closing date  (usually 45 to 60 days), 

3.the restaurant must be left in  “broom clean” condition and 4. keys for the restaurant must be delivered to the Landlord. 

Under this scenario, if all 4 conditions are satisfied, the guarantor is released from its guarantee under the Lease. 

However, the restaurant remains liable for the remaining rent and additional rent due under the Lease, unless the Landlord 

releases the restaurant from future rent (by the parties entering into a Lease Surrender Agreement) or the restaurant’s lease 

is subleased or assigned to a 3rd party in accordance with the terms of the Lease and  with the consent of the Landlord. 

As can be seen from the above examples, a GGG is a more limited form of guarantee. 

Under New York custom and practice, the guarantee whether it is a regular guarantee or a GGG can be incorporated into the 

terms of the lease,  but it must be signed and dated by the guarantor and the guarantor is usually required to give his or 

her social security number  and home address to the Landlord.

The guarantee or good guy guarantee can also be its own  separate document  and it is usually two to five pages long.

Before a restaurant closes, the lease and the guarantee, should be reviewed  by an experienced attorney to determine what 

conditions must be met. Any clients having questions regarding a closed or failed restaurant and lease guarantees or good guy 

guarantees should contact Jim Shenwick at 212-541-6224 or  email him at jshenwick@gmail.com. Jim Shenwick negotiates leases, 

practices bankruptcy law and represents failed or closed restaurants.