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As businesses across South Florida reopen, for some it’s just not enough. Many small business owners are now faced with a tough decision whether to file for bankruptcy or not.
NBC 6 Anchor Sheli Muñiz spoke to business bankruptcy attorney, Joseph Pack with Pack Law about the options.
SHELI: What do you tell companies weighing their options to file for bankruptcy or not?
PACK: Sure, one of the issues I’m seeing a lot is that companies are having this question about what they should do going forward, and their concerns and they’re concerned about whether they can pay their bills not only now but, in the future, as well. We have all talked about the pandemic is a time for self-reflection, and one of the things that I’m telling my clients is whether the pandemic is really the problem, or whether the pandemic has been the proverbial nail in the coffin.
SHELI: Oftentimes, people presume if a company files for bankruptcy, they’re going out of business, i.e. JCPenney.
PACK: Sure, bankruptcy doesn’t mean at all that a company needs to go out of business, and in fact, with companies like JCPenney and large huge organizations that file for Chapter 11 reorganization, when people read about them closing stores, it doesn’t mean they’re going out of business. In fact, what the debtor or the party in bankruptcy, like JCPenney, is doing is utilizing bankruptcy code is to extract or get rid of the leases that are not favorable to their business.
With respect to small businesses and businesses that have less than $7.5 million in debt, what’s going is through the Cares Act, there is not only the ability to keep their businesses where they are in bankruptcy, but they don’t need to necessarily have to pay their creditors in full.
SHELI: Did the Paycheck Protection Program help stave off bankruptcies?
PACK: I think that the PPP did help stave off bankruptcies. I think it was mostly potent because it was in combination with a lot of other protections. But, as those restrictions are getting lifted, lenders are going to start to exercise their rights and remedies against their borrowers who aren’t paying their debts, landlords with their respective tenants who are not paying their rents … it’s not going to be like this forever.