Written by Craig D. Robins, Esq.
Yesterday’s Businessweek Magazine contained an insightful article, “Bankruptcies: The Next Wave.”
The author analyzed the current economy and stated that even though credit markets have improved somewhat as of late, and the American economy may be on the road to recovery, that won’t prevent a new run of corporate bankruptcies in the next year.
Here’s why: too many companies loaded up with too much debt to survive the next year without defaulting on their debt obligations. As such, they will need to file for bankruptcy protection under Chapter 11.
There is still too much debt on the balance sheets of corporate America. Banks gave many loans in 2007 when the economy was still strong. However, these loans are now coming due at a time when the economy is still weak and access to additional credit is very tight.
The recent improvement in the stock market may make credit more available. However, banks will only make credit available to financially healthy companies, and not those who may need it the most.
The article concluded by saying: “The irony is that a record number of troubled firms could tumble into bankruptcy next year, at the same time that the economy and credit markets start showing major signs of improvement.”
Unfortunately, the wave of Chapter 11 bankruptcy filings will certainly hit Long Island, as it is home to a number of struggling companies, including retail and restaurants.
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Written by Craig D. Robins, Esq.
As long as a debtor is honest and straight-forward with their bankruptcy attorney about the facts of their case, and as long as the bankruptcy attorney is experienced and qualified to handle the case, there is very little that can go wrong with a consumer’s typical Chapter 7 bankruptcy filing.
Based on my experience, the following situations are where a debtor can get into trouble:
Reason #1: The debtor does not advise the attorney of all of their assets and liabilities and other information, and as a result, the petition is not accurate. If a trustee learns that the debtor withheld important information, the trustee can object to the debtor’s discharge.
Reason #2: The debtor does not use a bankruptcy attorney and instead files a pro se petition. Bankruptcy law, practice and procedure is complicated enough for bankruptcy lawyers; it is even more difficult for the lay person to understand everything that is necessary for a bankruptcy case to go smoothly.
Even if a debtor can prepare the petition on his own, there are still so many requirements under the new bankruptcy laws that it is very difficult to comply with all of them without knowing all of the particularities of the law. The bankruptcy court throws out many pro se bankruptcy cases because the pro se debtor does not do what they are required to do.
Reason #3: The debtor employs an attorney who is not experienced in bankruptcy law. As indicated above, bankruptcy law has become rather complex and complicated and can result in a mine field of traps and pitfalls for the unwary. I’ve personally seen many, many debtors get into trouble because their bankruptcy petitions were filed by general practitioners who were not sufficiently versed in bankruptcy law.
Knowing what assets are protected, knowing what documents must be filed and how, and knowing relevant deadlines are all very important aspects of practicing bankruptcy law which are not that easy to grasp for those who do not regularly practice in the bankruptcy court.