My bankruptcy practice primarily focuses on representing small businesses and owners. I I specialize in the representation of small to mid-size closely held or family owned companies, usually with total debts of $10 million or less. I also have considerable experience in representing bankruptcy estates – both Chapter 7 trustees and Chapter 11 debtors-in-possession, and I am one of the Small Business Reorganization Act (SBRA) Chapter 11 Trustees for the Northern District of Ohio.
I prefer to avoid filing a bankruptcy if at all possible. I have considerable experience in assisting small businesses with negotiating loan and lease modification agreements, loan take outs and forbearance agreements with banks, landlords, other institutional and business lenders.
I have experience in handling commercial litigation and state court receiverships both for receivers and small business owners.
While I specialize in smaller business representation, I have also been involved in large, complex bankruptcy cases. I often represent individual owners of large companies that are in bankruptcy. Some of the larger cases I have been involved in include In re Action Auto Rental, Inc., In re Hough Bakeries, Inc. and In re Geo. Worthington, Inc. where I represented the Debtor-in-Possession or the Trustee, and In re Arctic Express, Inc. In re Commissary Operations, Inc., In re Data Cooling Technologies LLC and Republic Engineered Products LLC, where I represented creditors, and In re Regional Diagnostics LLC where I acted as special counsel to the Liquidating Trustee.
I am a member of the American Bankruptcy Institute, the Turnaround Management Association, the National Association of Bankruptcy Trustees, the Ohio State bar Association, and the Cleveland Metropolitan Bar Association. I am a Fellow with the Cleveland Bar Foundation.
I have frequently lectured on bankruptcy and commercial law topics for the Bench-Bar Retreats for the United States Bankruptcy Court, Northern District of Ohio, the Ohio State bar Association, the Cleveland Metropolitan Bar Association, The Akron and Canton Bar Associations, and the National Business Institute.
A few of my more recent presentations were: Author and Co Speaker, Small Business Chapter 11, Bench Bar Retreat October 2019 and as a Co-Author and Co Speaker for a Lender Workout Panel, for the William J. O’Neill Bankruptcy Institute, May 2018.
Some of the others include:
Author and Co Speaker, Consumer Issues Exemptions, Bench Bar Retreat October 2017.
Author and Co Speaker, Ethical Issues in Chapter 11: the Duty of Candor, Conflicts of Interest and the Lying Client –Dealing with Ohio’s Rules of Professional Conduct Bench Bar Retreat October 2011
Co-Author and Co Speaker, Individual Chapter 11 – Not Just “Some Big Chapter 13”– or – Your Lineup has to Hit 1 through 9 and Avoid the Luxury Tax to Score!, William J. O’Neill Bankruptcy Institute, May 2014.
Author and Co Speaker, Lightning Round Topics, William J. O’Neill Bankruptcy Institute, May 2012.
Author and Co Speaker, Introduction to the Bankruptcy Process, Introduction to Chapter 11 of the Bankruptcy Code Seminar, December 2009.
Author and Co Speaker, Selected Issues in Chapter 11 Finance: The Duty of Candor and Conflicts of Interest Under Ohio Rules of Professional Conduct, William J. O’Neill Bankruptcy Institute, April 2007.
Author and Co Speaker, Representing the Criminal Debtor, Bankruptcy Litigation Seminar, November 2007.
Author and Co Speaker, Consumer Protection in Bankruptcy, The Who, The What, The When, The Where, and The How, William J. O’Neill Bankruptcy Institute, December 2002.
Co-Author and Speaker, Trustee and Lender Perspectives on One-Witness Mortgage Cases: An Issue Two Inches Wide and Ten-Miles Deep, William J. O’Neill Bankruptcy Institute, December 2000.
Speaker and Author, Representing the Debtor in Bankruptcy – June 1997
Co-Author, The Role of the Contract Surety; Why the Reorganizing Contractor Might be an Oxymoron, William J. O’Neill Bankruptcy Institute, December 1996.
Bankruptcy is both a federal law and a legal process for realigning the assets and liabilities of individuals and companies. The person or company that chooses to file bankruptcy is called the “debtor.” Most commonly, bankruptcy is a voluntary process and the debtor is the one who chooses to file for bankruptcy.
The most common reason that a debtor chooses to file bankruptcy is because their debts exceed a level that makes it unlikely that the debtor will ever be able to repay them at all, or at least in a sensible timeframe. This inability to repay often may be caused by a loss of an individual’s job, or a company’s loss of business income.
Bankruptcies come in two general “flavors:” liquidations and reorganizations. Liquidations, sometimes called “straight bankruptcy,” are generally simpler to understand and are often handled under Chapter 7 of the bankruptcy code. In general, individual reorganizations are usually handled by Chapter 13 of the bankruptcy code while company reorganizations are handled under Chapter 11.
It is important to understand that bankruptcy deals with the legal consequences of debt; it does not necessarily fix the debtor’s financial situation (though it can greatly improve it). If the debtor does not make enough money to pay current expenses as they come due after filing for bankruptcy, the debtor will only end up back win financial difficulty again. In short bankruptcy does not make money for the debtor.
To understand how bankruptcy works it is easiest to begin with liquidation or “straight bankruptcy.” For information of reorganization bankruptcies see “What is Reorganization?”
A liquidation bankruptcy is somewhat like the legal process that happens when someone dies. A person’s death my create an estate (usually called a “probate estate”) that consists of all the deceased person’s property and liabilities. That probate estate is controlled by an administrator who uses the estate property to pay the deceased person’s bills, with any money left over going to the beneficiaries of the will.
In the same way, a bankruptcy filing also creates an estate consisting of the debtor’s property and liabilities (called a “bankruptcy estate”) and administered by the bankruptcy trustee. A voluntary bankruptcy is started by an individual or company filing with the bankruptcy court a request for bankruptcy protection (called a “petition”) and filing a list of all the debtor’s assets and debts (called the “schedules”). The schedules include everything that the debtor owns which includes any real property, such as houses or buildings, and all personal property like vehicles, bank accounts, retirement of accounts such as IRAs etc. as well as any claims that the debtor may have against anyone else such as a a potential lawsuit.
Shortly after the filing, the trustee is appointed to administer the bankruptcy estate. The trustee interviews the debtor and reviews the debtor’s schedules and attempts to liquidate as much of the debtor’s property as possible and then to pay it out to creditors according to a certain order of payment set forth in the bankruptcy code.
However, not all the assets of an individual debtor are used to pay creditors. This is because individual debtors have the right to claim certain property out of the bankruptcy estate for themselves. These are referred to as “exemptions,” and vary from state to state depending on where the debtor is or was living at the time the bankruptcy case is filed. The determination and the use of exemptions can be complex, and it is vitally important to consult with an experienced bankruptcy lawyer about them before filing your case.
For a debtor, there are two benefits from filing bankruptcy: first, immediately upon filing there is an “automatic stay” of all legal actions to attempt to collect from the debtor including foreclosures, garnishments, and the like. Second, a few months after filing bankruptcy if all goes well, the individual debtor receives a “discharge” which is sort of a permanent injunction from anyone attempting to collect any of the debts listed on the bankruptcy schedules. The discharge is the primary reason in individual debtor files for bankruptcy protection.
There are however certain exemptions from discharge, including alimony and support obligations, certain tax debts, student loans and other debts arising from torts or other bad acts such as fraud or intentional injury. The determination of whether a discharge is available for certain kinds of debt is also potentially complex, and again, consulting with experienced bankruptcy counsel is essential before filing any bankruptcy case.
Reorganizations are types of bankruptcy where the debtor wants to avoid the liquidation sale of some or all their property. These are generally in two separate parts of the bankruptcy code: Chapter 11 and Chapter 13. (There are also special chapters for municipalities, Chapter 9, and for family farmers Chapter 12, but these are less common and not discussed here)
The general principal of reorganization is that instead of liquidating the debtor’s property and paying creditors, the debtor instead files a “plan” that trades an amount of their future income that at least equals what their property is worth in Chapter 7 (and hopefully more) that is used to repay creditors.
Chapter 13 is only available for individual debtors who have total debts below a certain dollar amount. Some of the reasons a debtor might choose to use Chapter 13 is that they do not qualify for Chapter 7 because they fail the “means test,” (see What is the Means Test) or they have a home that they want to keep and have fallen behind on mortgage payments. Also, certain debts not dischargeable in Chapter 7 can be discharged or at least paid over the plan in Chapter 13. A Chapter 13 plan can last for 3 or 5 years depending on the debtor’s income level.
Chapter 11 is primarily used by business entities, but it is available for individuals as well. One erroneous distinction that is often made is that a Chapter 7 is for the “liquidation” of a company while Chapter 11 is used to permit the company to operate while it seeks to reorganize its’ financial affairs. It is entirely possible to have a company liquidated under Chapter 11. The key distinction between Chapter 11 and Chapter 7 lies in the desire to continue operation of the business, whether to reorganize it or sell it as a going concern.
Chapter 11 is one of the most powerful legal tools available to assist and reorganize troubled businesses in the world. Conversion of debt to equity, sale of the business as a going concern or liquidation, reorganization of the business, the formation of new companies to manage the future operation of the debtor, all are possible, but are not mandated by the bankruptcy code. It is up to the debtor, its creditors, and their professionals to determine the best future use of the debtor’s assets and future financial structure of the debtor.
Individual debtors who have debts that are primarily “consumer debts,” that is debts that are for primarily personal, family or household purposes can only use Chapter 7 bankruptcy if their income is insufficient to fund a Chapter 13 plan. This is determined by the individual’s income level and comparing their expenses to what are known as the “IRS Collection Standards” for your area. These are standards developed by the IRS for typical amounts of expenses for certain family sizes in certain geographical areas of the country. There are exceptions to what is included, so it is important to consult with experienced counsel to determine if Means Test applies to you.
Please note that if most of your debts are from business operations (for example you have a large debt due to a guarantee of a loan to a failed business) then the Means Test does not apply to you.