Executive orders are putting a halt on evictions and lawsuits as creditors can’t take action during the coronavirus crisis.
“What I anticipate once it starts to open up, there’s just going to be a flood of all sorts of litigation, all sorts of bankruptcy that are going to come out from this,” said attorney Amish Doshi during a webinar with nearly 40 people, mostly lawyers, held last Thursday by the South Asian and Indo-Caribbean Bar Association of Queens. The event was held to show creditors and debtors their options.
Attorney Seni Popat added, “There’s no question that they’re going to rise.”
Popat said bankruptcy courts are understaffed with the demand they’re going to face when the pandemic ends.
He also noted that government relief “has barely reached a lot of the small businesses.”
Americans are carrying $687 billion in credit card debt that isn’t paid in full each month and now 36.5 million have filed for unemployment.
“That’s a staggering statistic,” Popat said.
The number makes up about one-fifth of the workforce, according to Doshi.
“It means you are going to be impacted whether it’s your clients are looking for somebody like Seni to help out and get them bankruptcy or whether your clients have to need somebody on the creditor’s side because one of their customers or tenants or vendors have filed for bankruptcy,” he said.
Popat did point out an option small businesses can use, Chapter 11 Subchapter V.
The Coronavirus Aid, Relief and Economic Security Act permits businesses with debts of less than $7.5 million to get Chapter 11 relief, nearly tripling the previous total.
The attorneys noted that Chapter 11 is very costly over time and is really meant for larger businesses, whereas Chapter 7 is a liquidation process and Chapter 13 is for people with income looking to repay debt over a certain period of time.
“Exploring bankruptcy is certainly an option for certain people that, if you know it’s not realistic for them to repay their debt,” Popat said.
Doshi said there’s an anticipation of overcrowding in bankruptcy courts after the pandemic ends and that they may not be equipped “just in terms of economics and manpower to handle this or at least they’re going to be falling behind.”
That will mean, he said, more pressure on the creditors to do the legwork.
Doshi said it’s important to consider the relationship of the parties when looking to collect debt during and after the crisis.
“Were they always on time but now they’re not ... or was there an underlying problem to begin with?” he said. “Every month the landlord had to call the tenant and say, ‘Hey, I didn’t get my month,’ whether it’s residential or commercial.”
Doshi said if the problems are related to the coronavirus it can be worked out “so that they can make it through the crisis and not have to push them into bankruptcy.”
He said landlords and tenants are trying to get through this together.
“Believe it or not, a lot of people are nicer than one would think,” Doshi said.