Defaulted SBA EIDL Loans, Limited Liability Company (LLC) and Cancellation of Debt Income (COD) under Section 108 of the Internal Revenue Code

 Defaulted SBA EIDL Loans, Limited Liability Company (LLC) and Cancellation of Debt Income (COD) under Section 108 of the Internal Revenue Code

As many readers of our emails and blog posts know, Shenwick & Associates  has developed a specialty helping borrowers, who have defaulted on SBA EDIL loans. Jim Shenwick, Esq  has an LLM in taxation from NYU Law School and is familiar with many tax issues involving SBA loan defaults.

Provided at the end of this email are links to many articles he has  written about defaulted SBA EIDL loans.

There are actually two issues involved in Limited Liability Company SBA EIDL loan defaults, the first one involves  a workout with the SBA to cure the loan default (or a bankruptcy filing by the LLC)  and the second which gets much less focus and attention are the tax consequences to the borrower  or members of the LLC, when an SBA loan  goes into default.

An LLC  is a pass-through entity for tax purposes, which means no taxes are paid by the LLC, they are paid by the members who own the LLC.

Section 108 of the Internal Revenue Code pertains to income from the discharge (non payment) of indebtedness and is also known as cancellation of debt income (COD).  Section 108 provides that if an individual or a business borrows money and the loan is not repaid, the individual or business  are enriched by the amount of the non-payment. The amount of no-payment is deemed ordinary income for tax purposes.

As an example, assume an LLC borrows $100,000 from a bank and does not repay the loan. The bank sends the IRS and LLC a Form 1099-C, reporting $100,000 of ordinary income. Since the LLC is a pass through entity, that $100,000 of ordinary income is reported by the LLC members (owners of the LLC).

If those members are in a  24% tax bracket, they would have to pay $24,000 in federal income tax on income from discharge of indebtedness.

If the member or owner of the LLC does not report that income on their tax return and pays tax on that income, the IRS will audit them. It will then assess penalties and interest on the unpaid taxes.

Many clients, accountants and lawyers are unaware of this issue or do not focus on the income from indebtedness issue (COD), regarding SBA EIDL loan defaults. 

WHAT CAN BE DONE TO AVOID INCOME FROM DISCHARGE OF INDEBTEDNESS?

Section 108 of the IRC provides two exceptions to COD income.

The first is that  if a Member of the LLC files for Bankruptcy (IRC 108(a)(1)(A)) then no COD income is reportable or payable.  

The second is the Insolvency Exception (IRC 108(a)(3)). Insolvency means that the taxpayer's liabilities are greater than their assets.  

Individuals using the  Insolvency Exception need to attach Form 982 to their  federal income tax return.

This email provides a brief  overview of EIDL loan default tax issues. Clients are advised to consult with a specialist in this area of law and a tax adviser. Jim Shenwick, Esq. is available to speak with client’s or their advisors.

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

Please click the link to schedule a telephone call with me.

https://calendly.com/james-shenwick/15min

We held individuals & businesses with too much debt!

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Jim Shenwick, Esq/Shenwick & Associates Blog Posts on SBA EIDL Loans

Offers In Compromise ("OIC") for Defaulted SBA EIDL loans and Section 108 of the Internal Revenue Code ("IRC"), Relief of Indebted Income, a Trap for the Unwary!

https://shenwick.blogspot.com/2023/05/offers-in-compromise-oic-for-defaulted.html

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

 

Biden's Plan B on student loan forgiveness relies on Higher Education Act: What to know

See article at https://abc7chicago.com/joe-biden-student-loan-forgiveness-plan-higher-education-act/13465176/

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

Please click the link to schedule a telephone call with me.

 https://calendly.com/james-shenwick/15min

We held individuals & businesses with too much debt!

Commercial Chapter 11 Filings Increased 68% Y/Y in the First Half of 2023

 Commercial Chapter 11 Filings Increased 68% Y/Y in the First Half of 2023 see the article at https://www.monitordaily.com/news-posts/commercial-chapter-11-filings-increased-68-in-the-first-half-of-2023/

"'Here's What Happens When You File For Bankruptcy" Motley Fool

 The Motley Fool has an article titled 
Here's What Happens When You File For Bankruptcy
The article can be found at https://www.fool.com/the-ascent/personal-finance/articles/heres-what-happens-when-you-file-for-bankruptcy/
Clients with questions about a Bankruptcy Filing or Bankruptcy should contact Jim Shenwick, Esq
Jim Shenwick, Esq  917 363 3391  jshenwick@gmail.com 
Please click the link to schedule a telephone call with me.
 https://calendly.com/james-shenwick/15min
We held individuals & businesses with too much debt!

Yes, The IRS Can Sue To Collect On A Debt Forbes article

 Forbes has an excellent titled

"Yes, The IRS Can Sue To Collect On A Debt"

The article discusses the IRS assessment statute of limitations (three years from the time a tax return is filed to make the assessment) and the IRS   collection statute of limitations of 10 years. 

During the 10 years, the IRS has the power to garnish wages, impose a levy on bank accounts and file a lien against real property (e.g. a person’s home

The article can be found at:

https://www.forbes.com/sites/jessicaledingham/2023/06/28/yes-the-irs-can-sue-to-collect-on-a-debt/?sh=759b0cac5c1d

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

Please click the link to schedule a telephone call with me.

https://calendly.com/james-shenwick/15min

We held individuals & businesses with too much debt!

Facing Bankruptcy After a $700 Million Bailout" New York Times article about Wasted Pandemic Loans from Government

"Facing Bankruptcy After a $700 Million Bailout"" New York Times article about Wasted Pandemic Loans from Government.  

The article can be found at

 https://www.nytimes.com/2023/06/27/business/yellow-trucking-bailout-teamsters.html

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

Please click the link to schedule a telephone call with me.

 https://calendly.com/james-shenwick/15min

We held individuals & businesses with too much debt!

"Behind on Student Loan Payments? Here's How It Can Impact Your Credit Score" Motley Fool

The Motley Fool has an article titled "Behind on Student Loan Payments? Here's How It Can Impact Your Credit Score". The article can be found at https://www.fool.com/student-loans/2023/06/25/behind-on-student-loan-payments-heres-how-it-can-i/

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

Please click the link to schedule a telephone call with me.

 https://calendly.com/james-shenwick/15min

We held individuals & businesses with too much debt!

How to File Bankruptcy for Credit Card Debt

How to File Bankruptcy for Credit Card Debt

Investor Times has a helpful article about how to file bankruptcy to discharge credit card debt.  The article can be found at  https://investortimes.com/how-to-file-bankruptcy-for-credit-card-debt/

Jim Shenwick, Esq  

917 363 3391  

jshenwick@gmail.com

Please click the link to schedule a telephone call with me.

https://calendly.com/james-shenwick/15min

We held individuals & businesses with too much debt!

The Great Grift: How billions in COVID-19 relief aid was stolen or wasted

 AP News is reporting that billions of COVID19 relief was stolen or wasted.  Should we be surprised? 

The story can be found at https://apnews.com/article/pandemic-fraud-waste-billions-small-business-labor-fb1d9a9eb24857efbe4611344311ae78

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

We help companies & individuals with too much debt!

Student loan payment restart: Here’s the official date you’ll have to start paying again Aug 29, 2023 according to AL.com

Student loan payment restart: Here’s the official date you’ll have to start paying again Aug 29, 2023 according to AL.com 

 AL.com is reporting that the official date when student loan payments will commence is August 29, 2023. The article can be found at https://www.al.com/news/2023/06/student-loan-payment-restart-heres-the-official-date-youll-have-to-start-paying-again.html

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

Please click the link to schedule a telephone call with me.

 https://calendly.com/james-shenwick/15min

We held individuals & businesses with too much debt!

Globe Newswire is reporting that Commercial Chapter 11 Filings Doubled Over Same Period Last Year. 

The article can be found at https://www.globenewswire.com/news-release/2023/06/02/2681388/0/en/Commercial-Chapter-11-Filings-Doubled-Over-Same-Period-Last-Year.html

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

Please click the link to schedule a telephone call with me.

 https://calendly.com/james-shenwick/15min

We held individuals & businesses with too much debt!

 The Motley Fool has an article about 

Here's What Happens When a Company You've Invested in Goes Bankrupt.

The article can be found at https://www.fool.com/the-ascent/buying-stocks/articles/heres-what-happens-when-a-company-youve-invested-in-goes-bankrupt/

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

Please click the link to schedule a telephone call with me.

 https://calendly.com/james-shenwick/15min

We held individuals & businesses with too much debt!

EIDL Loan Approved: Now What? A Comprehensive Guide for Small Business Owners

EIDL Loan Approved: Now What? A Comprehensive Guide for Small Business Owners

Small Biz Trends has a very helpful article on EIDL loans. The article can be found at 

 https://smallbiztrends.com/2023/05/eidl-loan-approved-now-what.html

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

Please click the link to schedule a telephone call with me.

 https://calendly.com/james-shenwick/15min

We held individuals & businesses with too much debt!

Yahoo Finance article on Filing for Personal Bankruptcy

Yahoo Finance has a very informative article on filing for personal  bankruptcy? The article can be found at 

https://finance.yahoo.com/news/file-bankruptcy-195833314.html

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

Please click the link to schedule a telephone call with me.

 https://calendly.com/james-shenwick/15min

We held individuals & businesses with too much debt!

Bankruptcies are skyrocketing — and that’s only half the story see interesting article on The Hill-URL below.

 

Bankruptcies are skyrocketing — and that’s only half the story. Interesting article about the increase in bankruptcy filings in The Hill. URL for the story is below.

https://thehill.com/opinion/finance/4011001-bankruptcies-are-skyrocketing-and-thats-only-half-the-story/

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

We help individuals & companies with too much debt!

Shenwick & Associates New Website

 Jim Shenwick is proud to announce that our new & improved website can be viewed at https://sites.google.com/site/jshenwick/home

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

Repeat Bankruptcies Are Piling Up at Fastest Rate Since 2009

 

Yahoo Finance is reporting that "Repeat Bankruptcies Are Piling Up at Fastest Rate Since 2009".  The article can be found at 

https://finance.yahoo.com/news/repeat-bankruptcies-piling-fastest-rate-183531003.html?guccounter=1

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

We held individuals & companies with too much debt!

Offers In Compromise ("OIC") for Non SBA EIDL loans and Section 108 of the Internal Revenue Code ("IRC"), Relief of Indebted Income, a Trap for the Unwary!

Offers In Compromise ("OIC") for Defaulted SBA Non  EIDL loans and Section 108 of the Internal Revenue Code ("IRC"), Relief of Indebted  Income, a Trap for the Unwary!

Many clients contact Jim Shenwick, Esq regarding assistance with their defaulted SBA Non EIDL loans and ask that we assist them with filing an OIC with the SBA.

BACKGROUND

By way of background, if an individual or a company borrows money from the SBA and is unable to repay their loan, one option is to file an OIC with the SBA, requesting that they be allowed to pay only a portion of the money's due on the defaulted Non EIDL loan as final and full payment for the SBA loan. 

For example, let's assume that an individual borrowed $200,000 on an Non EIDL loan and hypothetically offered $25,000 as a lump sum payment to the SBA as a final and full payment on the defaulted SBA loan (OIC offer) 

The SBA OIC program is similar to the OIC program for outstanding taxes owed to the IRS.

 Historically, to file for an OIC  with the SBA, the business had to  close. However, recently the SBA has changed their rules, and they are now allowing individuals or businesses with defaulted SBA loans to file an OIC even if the business is still open. 

The SBA has an Offer in Compromise form that must be filed, in addition to other forms, that detail the business’s assets, liabilities, revenue, & expenses and why the SBA Non EIDL loan cannot be repaid.

However, filing for an offer in compromise with the SBA may not benefit the borrower because it may result in taxable income resulting from relief of indebtedness income pursuant to Section 108 of the IRC.

 

LAW

Section 108 of the Internal Revenue Code, provides that if an individual or a business borrows money and does not repay that money, the amount that is not repaid is considered ordinary income. For example, assume an individual borrows $100,000 from a bank and repays $50,000; according to the IRS, the taxpayer has been enriched to the sum of $50,000, and the bank is required to report "relief of indebtedness income" of $50,000 to the IRS on Form 1099-C. If the taxpayer does not report this income to the IRS, they will be audited and assessed interest and penalties on the taxes they did not report and pay.

 There are two exceptions to "relief of indebtedness income" The first exception, is the Bankruptcy Exception (see Section 108(a)(1)(A) of the IRC). If an individual or business files for bankruptcy, they do not have to report relief indebtedness income. The second exception is  the Insolvency Exception, (see Section 108(d)(3) of the IRC). If an individual's or company's liabilities exceed their assets on the date that the loan is satisfied, partially paid off or discharged, they also do not have to pay relief of indebtedness income. 

An example of the Insolvency Exception is as follows: an individual owns real estate and personal property worth $250,000, has liabilities totaling $500,000 (Insolvent). Under this scenario, if the taxpayer  had $200,000 of relief of indebtedness income (since their liabilities exceed their assets) they  would not have to  pay tax on the $200,000 of a relief of indebtedness income.

Accordingly, taxpayers and their advisors make the mistake of filing for an OIC with the SBA, without considering the tax consequences of that decision. If they do that, they will have effectively traded an SBA problem (the defaulted SBA Non EIDL loan) with an Internal Revenue Service relief of indebtedness income problem in the near term.

For example, assume a taxpayer had an LLC which borrowed $200,000 from the SBA in the form of an Non EIDL loan. The LLC  was unable to repay the Non EIDL loan, and their plan was to file an offer in compromise with the SBA in the amount of $25,000. Assume that  the taxpayer  who owned the LLC also had a $1 million pension plan. If this taxpayer were to file for an OIC with the SBA,  and if the OIC offer were accepted by the SBA, the  taxpayer would have to report $175,000 of ordinary income on their tax return ($200,000-$25,000),  provided that the Bankruptcy Exception and the Insolvency Exception do not apply. If the taxpayer was in a 30% tax bracket, they would have to pay $52,500.00 ($175,000 x 30%) in taxes in addition to the $25,000 they paid to the SBA (for the OIC) for a total of $77,500. 

In the above scenario, if  the LLC had filed for chapter 7 bankruptcy, they could have avoided paying the SBA $25,000 (OIC) and saved $52,500 in taxes—a better result for the borrower.

The bottom line is that prior to filing for an OIC with the SBA, an individual or business considering making an offer must consider the tax consequences of the offer as well!

 Clients or advisors with questions about defaulted Non EIDL loans are encouraged to contact Jim Shenwick, Esq.  jshenwick@gmail.com   917 363 3391.

Please click the link to schedule a telephone call with me.

 https://calendly.com/james-shenwick/15min

Jim is a Bankruptcy and Workout attorney with an LLM in Taxation from NYU Law School and he has SBA Non  EIDL default experience. 

Jim Shenwick SBA EIDL Blog Posts:
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

Small businesses expect to fail. Here’s what will happen to their PPP loans.

June 24, 2020

CNBC

Key Points

• Small businesses have received nearly $630 billion in combined funding through the Paycheck Protection Program and the Economic Injury Disaster Loan program.
• Nearly a quarter of small businesses are considering closing permanently due to Covid-19, one survey found.
• All PPP loans and EIDL loans of less than $25,000 have terms that are relatively favorable to borrowers if they need to close.

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

People Love to Threaten Bankruptcy

 Above the Law blog had an article written by Jordan Rothman titled "People Love to Threaten Bankruptcy During Litigation", the article can be found at https://abovethelaw.com/2023/03/people-love-to-threaten-bankruptcy-during-litigation/.

Jordan is correct in that many defendants in litigation threaten bankruptcy to obtain a favorable settlement. However, in my experience as a bankruptcy practitioner, many parties that threaten bankruptcy often file and those cases are generally filed as a chapter 7 liquidation, where after the payment of Bankruptcy Trustee fees and expenses, there is little money to distribute to unsecured creditors.

In fact, when the threat to file is made by an experienced bankruptcy attorney, it has an even greater impact and we have settled many cases with that approach. In fact, we will often prepare a draft of a bankruptcy petition and send it to an adversary for settlement purposes only, showing what the creditor would receive in a bankruptcy filing (we call this a "pro forma bankruptcy petition").

 

Alternatively, we are often retained by litigators or their clients to determine what their client would receive if their adversary filed for bankruptcy-we call this a "back of the envelope calculation".

Parties wishing to discuss these issues are encouraged to contact Jim Shenwick, Esq   917 363 3391   jshenwick@gmail.com

 

 

Weight Loss Brand Jenny Craig Files for Bankruptcy, Shuts Down

Weight Loss Brand Jenny Craig Files for Bankruptcy, Shuts Down

 Bloomberg is reporting that Jenny Craig files for Bankruptcy last week and is shutting down. People and companies that are owed money should file a Proof of Claim & landlord's should expect that their leases with Jenny Craig will be rejected. Individuals or companies having questions about the Jenny Craig bankruptcy filing should contact Jim Shenwick, Esq 917 363 3391  jshenwick@gmail.com

We help companies & individuals with too much debt!

New Relief Program for SBA EIDL Borrowers Who are Having Difficulty Repaying EIDL Loans " Hardship Accommodation Plan"

 The SBA has announced a "Hardship Accommodation Plan" for EIDL loan borrowers.

New Relief Program for SBA EIDL Borrowers Who are Having Difficulty Repaying EIDL Loans " Hardship Accommodation Plan"

If approved, the Hardship Accommodation Plan will reduce the borrower’s payment to 10% of their monthly payment for six months, after which their regular monthly payment will resume unless they apply for, and receive, another six-month extension.

Loans under $200,000 can enroll in a hardship accommodation plan through their MySBA Loan Portal. For larger loans, they will need to call the Covid EIDL Servicing Center.

For businesses with Covid EIDL loans that are under $200,000, the SBA requires, along with an offer in compromise application, the most recent profit and loss statements, most recent balance sheet and the most recent three months of history for all business checking accounts, along with its most recent federal tax returns and any copies of a purchase agreement or dissolution documentation if sold or shut down.

This information will be used to  evaluate a borrower’s ability to repay the outstanding EIDL loan.

If outstanding EIDL SBA loans are not repaid the SBA can pursue the business's collateral, commence litigation, wage garnishment or intercept tax refunds.

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

We help individuals & companies with too much debt!

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

With consumer debt at an all-time high, a financial planner explains who should consider bankruptcy Business Insider article

 
With consumer debt at an all-time high, a financial planner explains who should consider bankruptcy Business Insider

The article can be found at the Business Insider at https://www.businessinsider.com/personal-finance/decide-bankruptcy-makes-sense-financial-planner-2023-4

Jim Shenwick Esq  917 363 3391  jshenwick@gmail.com

Please click the link to schedule a telephone call with me.
https://calendly.com/james-shenwick/15min

We help individuals & companies with too much debt!

Small Business Subchapter V Bankruptcy Filings Increase 81% Y/Y, Commercial Chapter 11 Filings Up 32% Y/Y

 

Small Business Subchapter V Bankruptcy Filings Increase 81% Y/Y, Commercial Chapter 11 Filings Up 32% Y/Y

The story can be found at https://www.abladvisor.com/news/36372/small-business-subchapter-vs-increase-81-y-y-commercial-chapter-11-filings-up
Subchapter V is a scaled down  form of simplified chapter 11 bankruptcy filing for small businesses.  Individuals or businesses interested in obtaining more information about Sub V filings can contact Jim Shenwick, Esq  917 363 3391  jshenwick@gmail.com
Please click the link to schedule a telephone call with me.
https://calendly.com/james-shenwick/15min

We help individuals & businesses with too much debt!

Commercial Chapter 11 Filings Rise 79% Y/Y in March

ABL Advisor's  is reporting that new Chapter 11 bankruptcy filings increased by 79% in March 2023.  The article can be found at https://www.abladvisor.com/news/36211/commercial-chapter-11-filings-rise-79-y-y-in-march

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

We held individuals & businesses with too much debt!

Bed Bath & Beyond filed for Chapter 11 Bankruptcy Protection

 Bed Bath & Beyond ("BBB") filed for Chapter 11 Bankruptcy Protection. Individuals & businesses who are owed money by BBB should organized their business records & file a Proof of Claim when  notified by the Bankruptcy Court.

Also & importantly, If a vendor delivered goods to  BBB in the 20 days before the Debtor filed bankruptcy, and those goods were delivered in the ordinary course of business, then you can get administrative claim status of the amount of the goods delivered. See 11 U.S.C. § 503(b)(9) and you should consult with a bankruptcy attorney as soon as possible.

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

We held individuals & businesses with too much debt!

CFO website is reporting that Chapter 11 Bankruptcy Filings Climbed 79% in March

The article can be found at https://www.cfo.com/credit-capital/bankruptcy/2023/04/chapter-11-bankruptcy-subchapter-v-epiq-commercial-filings-svb-financial-diamond-sports/

Preferences & Chapter 7 Bankruptcy Filings

PLEASE NOTE THAT EFFECTIVE IMMEDIATELY, PLEASE USE 917 363 3391 TO CONTACT JIM SHENWICK, ESQ.

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The New York Post recently had an article about a New York bankruptcy trustee who has ordered dozens of former sales reps at Worth Collection (an upscale, New York-based women’s apparel label that filed for chapter 7 bankruptcy three years ago) to return tens of thousands of dollars in commissions they earned shortly before the company’s bankruptcy filing. The article can be found at https://nypost.com/2023/03/30/bankrupt-nyc-fashion-labels-sales-reps-ordered-to-return-commissions/?utm_source=gmail&utm_campaign=android_nyp

The article states that stylists who worked as independent contractors for Worth Collection  (which catered to professional women at trunk shows that were typically held at the stylists’ homes or showrooms) were ordered to repay  the earned commissions by a US Bankruptcy Trustee.

In the way of background, when a company files for chapter 7 bankruptcy protection, a bankruptcy trustee is appointed to close the business, liquidate the business’s assets, and distribute those monies to creditors. 

The bankruptcy trustee will review the company's financial statements, bank statements, check registers, and tax returns to determine if preferential payments or fraudulent conveyances were made. If  those payments occurred, then the bankruptcy trustee will commence lawsuit(s) (called Adversary Proceedings in bankruptcy parlance) to recover those monies.

While not actually stated in the article, it is this author’s opinion that the bankruptcy trustee’s action against the stylists was for preferential payments, i.e., payments made to the stylists on account of antecedent debts (old debts) within 90 days of Worth Collection’s chapter 7 bankruptcy filing. 

Additionally, unless the bankruptcy filing  was an involuntary bankruptcy filing, the company could have delayed their bankruptcy filing  by 90 days, to have prevented the bankruptcy trustee's preference actions against the stylists.

For this reason, whenever we advise a company to consider filing for chapter 7 bankruptcy, we discuss preference issues with management and the owners, review bank statements, and check registers for preference issues. 

Individuals or businesses with preferences can contact Jim Shenwick, Esq., for a consultation.

 

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

We help individuals and companies with too much debt!

 

 

 

Can you get a small business loan after bankruptcy?

 Bankrate has a very interesting and informative article about whether a small business can get a small business loan after bankruptcy? 

The article states that getting a small business loan after going through bankruptcy is possible, but it can be a challenge. At Shenwick & Associates we have found that individuals can obtain credit 6 months to 1.5 years after filing for personal bankruptcy and approximately 2 years for businesses. The article can be found at https://www.bankrate.com/loans/small-business/business-loan-after-bankruptcy/

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

We help individuals and businesses with too much debt!

 Yahoo Finance is reporting that 

Small businesses are filing for bankruptcy at a higher rate than at the peak of the pandemic - and a looming credit crunch could make things worse

The article can be found at https://uk.finance.yahoo.com/news/small-businesses-filing-bankruptcy-higher-180500570.html?guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_referrer_sig=AQAAAAWlcxq9eBw_EDH7SdbAwnf1p2vjy9R8T0I8s4z4TnAtWnfO5kbavPqyksi41EXY1qr-fv6bxeTLbWn3joCZdgqwyT46sHywfwRVYXeMQGd3nC2Gv3-R4xjNgB5GyJlT46RjQ5vRtKcvEazFBSjLY9VD8sE92flvSydqJ2EmdHxv

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

We help individuals & businesses with too much debt!

Rising number of Americans choose bankruptcy to deal with unmanageable debt: report

A Fox 13 Report states that  "A growing number of Americans, still reeling from the financial strain of the COVID-19 pandemic, are no longer benefiting from government relief efforts and are increasingly choosing bankruptcy to deal with unmanageable debt, according to a recent American Bankruptcy Institute (ABI)"

The article can be found at  https://www.q13fox.com/news/more-americans-choose-bankruptcy-debt-report

At Shenwick & Associates we held individuals & companies that have too much debt!

To schedule a telephone call with Jim Shenwick, Esq 

Please click the link to schedule a telephone call with me.

https://calendly.com/james-shenwick/15min

Bankruptcy Fraud is a Crime and People Who Commit Bankruptcy Fraud can be Arrested and Serve Time in Jail if Convicted

 

Bankruptcy Fraud: Former Attorney From Westchester Lied To Keep Home, Sports Car, Officials Say and was Arrested

https://dailyvoice.com/new-york/scarsdale/news/bankruptcy-fraud-former-attorney-from-westchester-lied-to-keep-home-sports-car-officials-say/860005/?emh5=07d29e82d0d168c807e94007ee2a9bb2&emh256=455e752c66fb0d80f8fdcfa65fb0e36b493bf4cfb8a38c283b91f42bb186af86&emsid=22110&lctg=eOjmpoXsZr8tCTDKSplgXx2UI88UKyCe&utm_source=daily-email&utm_medium=email&utm_campaign=daily-scarsdale-260059&group=0&test_id=None

Lying in Bankruptcy Court is a crime and people who commit that crime can be arrested and imprisoned. Jim Shenwick, Esq  917 363 3391  jshenwick@gmail.com

We help people & companies who have too much debt!

Please click the link to schedule a telephone call with me.

https://calendly.com/james-shenwick/15min

Federal Government Bailout Packages for Small Businesses: What You Need to Know - TDPel Media

 TDPelmedia has an article about bailout packages for small business. The article can be found at

https://tdpelmedia.com/federal-government-bailout-packages-for-small-businesses-what-you-need-to-know/

At Shenwick & Associates we help many clients with too much debt or not enough capital.

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

Please click the link to schedule a telephone call with Jim Shenwick

https://calendly.com/james-shenwick/15min

Jim Shenwick, Esq Commercial Leasing Biography in Manhattan New York City

 ● Jim Shenwick, Esq has  a specialty in commercial leasing (he has represented over 300 tenants and landlords in commercial lease negotiations).   

●Representative Manhattan transactions include the following: (a) represented over 250 commercial tenants representing office space in Manhattan, New York City.

●Represented a Landlord who leased retail space to a Gap store in Midtown East, (b) Represented a Landlord who leased space to a coffee chain in the East 20’s, (c) Represented a private equity fund that leased office space in 7 Time Square Tower, (d) Represented a hedge fund that leased office space at 590 Madison Avenue, (e) Represented an Internet social marketing company that leased space on 23^rd Street, (f) Represented a Landlord in Soho who leased space to a restaurant and food store, (g) Represented  an art gallery that moved to the West 26^th Street art district (h) Represented a hair transplant doctor who leased space for an upscale hair transplant facility on Madison Avenue and (i) Represented a chain of pizza stores who leased space throughout NYC and Long Island,

● Jim Shenwick, Esq. has written on the assignment/subletting of commercial leases, questions tenants need to ask Landlords before signing a commercial lease, “silent” commercial lease issues not dealt with in standard lease forms and hidden costs in commercial leases.  

● Jim Shenwick, Esq. also spoke at the Association of the Bar of the City of New York on commercial leasing issues for tenants.

 At Shenwick & Associates, we have represented more than 300 tenants in commercial leasing transactions, including office tenants, restaurants & retain stores.  Any clients having questions about commercial leases should contact Jim Shenwick, Esq.   jshenwick@gmail.com  917 363 3391  

Please click the link to schedule a telephone call with Jim Shenwick

https://calendly.com/james-shenwick/15min

 

                                                            

Commercial Leasing Checklist in New York City Manhattan Part II

 

1.                  Tenant should be permitted signage (at no cost)  in building lobby directory, elevator, floor and door (window signage flag should be permitted for retail)

 2.                  Tenant should have the right to make deliveries to the premises at any time of the day for retail use

3.                  Sidewalk maintenance & repair should not the responsibility of the retail tenant, other than snow removal

 4.                  Prior approval of private carter for retail Tenant.

 5.                  Tenant not have to pay Landlord’s  expenses for initial renovation plan review

 6.                  Tenant's renovation plans should be approved by Landlord prior to Tenant signing the Lease                     and the standard of review by Landlord should be "NUW"-not unreasonably withheld.

 7.                  Water for sink and toilet should be provided at no cost to Tenant and bills for other water uses                    should be by direct meter.

 8.                  Heating should be provided to Tenant even if there is in default under the lease. 

 9.                  Vault taxes, if any should be the responsibility of Landlord not Tenant.

10.              Obtain a  copy of the c/o for the premises and review prior to signing the Lease.

11.              Insurance rider should be sent to insurance agent for review and comment before the Lease is signed. 

12.              Construction clause, if any must be sent to the Tenant's architect for review.

13.              Brokerage clause must represent who is paying the broker and the accompanying indemnification clause  must be mutual

14.              Real Estate tax increases, should be paid over 12 months by Tenant

 At Shenwick & Associates, we have represented more than 300 tenants in commercial leasing transactions, including office tenants, restaurants & retain stores. Provided below is Part I of our Leasing Checklist.  Any clients having questions about commercial leases should contact Jim Shenwick, Esq.   jshenwick@gmail.com  917 363 3391  

Please click the link to schedule a telephone call with Jim Shenwick

https://calendly.com/james-shenwick/15min

Commercial Leasing Checklist in New York City Manhattan Part I

 At Shenwick & Associates, we have represented more than 300 tenants in commercial leasing transactions, including office tenants, restaurants & retain stores. Provided below is Part I of our Leasing Checklist.  Any clients having questions about commercial leases should contact Jim Shenwick, Esq.   jshenwick@gmail.com  917 363 3391  

Please click the link to schedule a telephone call with Jim Shenwick

https://calendly.com/james-shenwick/15min

Lease Checklist:

 1.                  Free rent?   How much? Tenant should receive 12 months rent at first year rate before rent increases in second year.

 2.                  Are the premises in a land-marked building? (alterations are more difficult)

 3.                  Request a  copy of the most recent tax bill and Tenant should only pay its pro rata share of taxes

4.                  Is the electricity direct meter, sub-meter or rent inclusion?

5.                  Assignment and sub-let provisions should automatically be allowed: (a) Tenant’s sale of its business, (b) merger of its business, (c) Tenant goes public, (d) assignment of  its lease to a related entity or division

 6.                  Non-structural alterations should be allowed as a matter of right to Tenant

 7.                  Interest on security deposit should go to Tenant without request or notice once per year

and security deposit should be returned to Tenant 30 days after lease ends

 8.                  Landlord should expressly consent to Tenant's particular use and assist Tenant in getting a liquor license (for a bar or restaurant)

 9.                  If the premises have a sprinkler installation, who pays for monitoring, and maintenance?

 10.              What is the electricity capacity of the premises wiring? Landlord should make a representation in the lease to the electrical capacity and the capacity should be sufficient for Tenant's business (important for a manufacturing or service business).

Check our Blog for Part II of our Leasing Checklist

Jim Shenwick, Esq

What is Chapter 11 bankruptcy?

 Business Insider has a very helpful article on Chapter 11 bankruptcy. The article can be found

 at https://www.businessinsider.com/personal-finance/what-is-chapter-11-bankruptcy

Many people are not aware that individuals as well as businesses can file for chapter 11 bankruptcy and that chapter 11 bankruptcy can be used to reorganize businesses as well as to sell assets.

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

We help individuals & companies with too much debt!

Please click the link to schedule a telephone call with Jim Shenwick

https://calendly.com/james-shenwick/15min

 

MOTLEY FOOL ARTICLE ON REPAYMENT OF SBA EIDL LOANS

 The Motley Fool has an article on the repayment of SBA EIDL Loans. The article is titled 
"Took Out a Small Business Loan During the Pandemic? You May Need to Start Paying It Back"
The article can be found at https://www.fool.com/the-ascent/small-business/articles/took-out-a-small-business-loan-during-the-pandemic-you-may-need-to-start-paying-it-back/
Any clients with questions about the repayment of SBA or EIDL loans should contact Jim Shenwick, Esq.  jshenwick@gmail.com   917 363 3391
"We held individuals & companies with too much debt!"

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