Page 54 - BusinessWest August 17, 2020

Pizza Kitchen, and Men’s Wearhouse.
Those names reveal the types of businesses
that are most in jeopardy, Katz continued, adding that, locally, many small businesses in the hospi- tality, retail, and fitness realms — but many other sectors as well — face severe challenges as they try to survive the pandemic.
For some in this category, an emerging option is what’s being called the ‘fast-pass’ small-busi- ness bankruptcy process, otherwise known as Subchapter V of Chapter 11 of the Bankruptcy Code. This new subsection, which became effec- tive in February, is not a response to COVID-19,
“My phone is starting to ring more with business owners who are either unsure how they’re going to make it, or are sure they can’t.”
but certainly seems to be tailor-made for the eco- nomic crisis the pandemic has created.
That’s because, as the name suggests, it is a faster, less expensive Chapter 11 reorganization path, designed specifically for much smaller busi- nesses than those that seek the Chapter 11 route. To be eligible for Subchapter V, an entity or an individual must be engaged in commercial activ- ity, and its total debts — secured and unsecured — must be less than $7.5 million, a new number (the old one was $2.725 million) resulting from provisions of the COVID-inspired CARES Act. At least half of those debts must come from business
activity.
Katz and others we
spoke with said the fast- pass option holds poten- tial for some businesses, but there are challenges within its many provi- sions, including the need to come up with a reor- ganization plan within
90 days of the filing. Such plans may be difficult to develop given how dif- ficult it is to see even a few weeks down the road, let alone several months, because of the pandemic.
“The one downside
is you file your bank-
ruptcy papers, and you’re
required, within 90 days,
to put a plan in place,”
said Mark Cress, a bank-
ruptcy specialist with
the Springfield-based
firm Bulkley Richardson.
“That’s a short window, and a lot of small busi- nesses are barely holding their own.”
For this issue and its focus on law, Business- West talked with these bankruptcy lawyers about what they can already see coming. They can’t pre- dict when this particular surge will begin, but they say it’s almost unavoidable.
Chapter and Verse
While Katz and Weiss were crafting analogies to waves and tsunamis, Cress wanted to draw
Mike Katz is expecting a “tsunami” of bankruptcy filings. What he doesn’t know is when this wave will hit.
parallels to the Great Depression.
Indeed, he told BusinessWest that the current
conditions rival, and in some cases (such as the quarterly decline in GPD) actually exceed those of the Great Depression that started roughly 90 years ago.
“This is worse than the Great Depression in a lot of ways,” he said. “The dip in the economy — it dropped by a third — was something we’ve never seen before. And but for the way the Fed has handled this, it would be devastating; those
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