The facts and figures surrounding COVID-19 and its effect on the world – not just the world of business, not just the law, but the whole world – are becoming clearer every day. Congress just passed a staggering $2 Trillion stimulus bill. Problem solved? Just kidding. Here’s the real deal when it comes to Corona Virus and what it will mean to members of the business and legal community over the next 90 days (and longer).
#1 Flatlining Revenue: The government stimulus and extended unemployment insurance are a bandaid on an open wound. Businesses and employees aren’t just facing lower revenues or rising costs. There is no revenue coming in at all. Customers cannot pay. Businesses cannot make payroll or pay trade creditors. Think of the 2008 Sub-Prime Mortgage crisis when people become too scared to participate in the economy.
#2 Hospitals Overwhelmed: Depending on your political leanings, you either do or do not believe that Corona is real. Yeah, there are still people claiming that it’s a Democratic plot against the President. At least that’s what they’ll say right up until they are wheeled into an ER and find out that the hospital system is overwhelmed. Not enough beds. Not enough Dr.’s and Nurses. Not enough sterile equipment.
#3 Depression and Overreaction: Many of us heard about the person who ingested a form of bleach in order to “kill the virus” and, yes, died. As extreme and unique as that reaction is, the bottom line is that “social distancing” and “sheltering in place” are not normal. We don’t like it, and are very likely to act out as a result. If you see roving gangs of young people frolicking outside, you’ve spotted the next COVID-19 trend: everyone’s getting it.
#4 The Cascade Effect: So, where do these social trends leave us? Let’s recap:
(a) In 30 to 60 days, most people will have drained their savings and ramped up borrowing – often on high-interest credit cards or even cash-out mortgages. 30 days after that many will have no choice but to file for Bankruptcy protection. They file to save their possessions, their homes, their cars, and their futures.
(b) In 60 to 90 days, most small to medium sized businesses will have also drained their cash reserves, wil have few to no new orders coming in, will be shy about taking on bank debt or other “stimulus” related benefits, and will have to look into a Bankruptcy to permit them to save their personal assets or just keep the business operating (at however low a level).
(c) Beyond 90 days from now is uncharted territory. Truly frightening. Even if there is a halting kind of recovery, it will not be fast or strong enough to make up for the months of 0 revenue and relentless costs that make up our lives. This is where the all Court systems, including Bankruptcy, will become as jammed up as the hospitals. Wait times will extend into years.
#5 And Now for Something Completely Different: All doom and gloom aside folks, we Americans are resilient. And professionals (Dr.’s, Lawyers, Accountants, etc.) are still showing up for work everyday and making themselves available to help. Take advantage of that availability – but for the sake of all of us, so it as soon as possible.
And finally, on a personal level I’d like to observe that the top 3 reasons for high anxiety in times like this are:
Waiting too long to pull the trigger (because hey, things could always turn around, right?)
Taking action – but too little, too late
Analysis Paralysis – don’t just think about protecting your family, do it. Do it now.
How can our office help? Consider our 25 years of experience with
Bankruptcy (both liquidation and reorganization)
Foreclosure Defense and Foreclosure Alternatives
Both Collection and Collection Defense Litigation
Chapter 7 Liquidation is effective for individuals and businesses of all sizes. Chapter 7 represents a fresh start and permanent way out of debt. Call or e-mail us for details.
Chapter 13 and Chapter 11 Reorganization allows individuals and businesses with regular income to reduce their repayment obligations while holding onto their personal property. Call or e-mail us to see if you qualify.
Counties Served: Will, Kendall, DuPage, Kane, LaSalle, Grundy, Suburban Cook, McHenry, Winnebago.
While Chapter 11 is an excellent way to keep a business in operation and under its existing management, the road to confirmation – that is, the approval of the Plan of Reorganization by the Court and Creditors of the business – is a long one fraught with traps for the unwary. Arm yourself with knowledge here.
According to the SBA there is a strong correlation between economic growth and entrepreneurial activity. Every day thousands start new businesses that drive jobs and revenues. But 95% of small businesses fail within 5 years. How can the filing of a Bankruptcy protect, and even encourage, business creation