Playing with Dominoes

As we weather the financial crisis brought on by the coronavirus pandemic, we are reminded of a child playing with dominos. Pre-COVID-19, a single business’s bankruptcy would put financial stress on its suppliers and in some instances its customers. Today, we see entire supply chains and segments of the economy collapse as soon as one link in the chain begins to wobble.

To some extent, we saw this same scenario play out during the Great Recession. However, that crisis was triggered by the implosion of mortgage-backed securities. The Federal Reserve was able to step in and shore things up before all the dominos fell. 

Now, we are facing an unprecedented threat to every industry. There has been a sharp decline in demand across almost every segment of the economy, and disruptions on the supply side mirror it. The Federal government is pumping out cash, but until consumers can safely shop and travel, and afford to do so, things look bleak. 

At Hanson & Payne, we are doing the best we can to help businesses in the Milwaukee area weather the storm

Businesses Are Increasingly Filing for Bankruptcy

We have seen a significant uptick in the number of businesses considering filing for bankruptcy. Since our firm handles both Chapter 7 and Chapter 11 cases, we are well-positioned to help business owners evaluate their different options. We view ourselves as true counselors, not just paper-pushers, and we want our clients to know that they can rely on us to advise them. We are committed to helping Milwaukee area business owners do what is best for their business, not what is the easiest for us to manage from the legal perspective. 

Because we really dig into our clients’ finances and care about their businesses, we have also been able to steer a lot of clients toward bankruptcy alternatives. 

As we mentioned above, the Federal government, as well as the State of Wisconsin is pulling out all the stops when it comes to managing the financial aspects of this pandemic. There are new initiatives being announced almost daily, and we are keeping a close eye on programs we believe our clients could benefit from. 

Some businesses may also be able to avoid bankruptcy and keep the doors open by negotiating a workout. Creditors are just as stressed as their borrowers during this difficult time, and are more than willing to be flexible. If your business is facing cash shortages and needs temporary or permanent relief from its creditors, we may be able to negotiate terms of forbearance or loan modification with your creditors.

Hanson & Payne’s well-established reputation as a bankruptcy firm that knows business is what drives businesses and commercial lenders from all over Wisconsin to rely on Hanson & Payne when they find themselves teetering on the edge. If you are in this situation, we are ready to help get you back on solid footing. Please contact our office today to schedule an initial consultation.

Wisconsin Debt Collectors Told To Cool It During The COVID-19 Crisis

The Wisconsin Department of Financial Institutions has issued some emergency guidance on debt collection during the coronavirus pandemic. Both creditors and debtors need to be aware of this new guidance and consider how it impacts them. 

DFI? Guidance? 

The Wisconsin Department of Financial Institutions (DFI) is the state government agency tasked with regulating our state’s banking and financial systems, and enforcing state-level consumer protection laws.

DFI collects reports required by state law, and it sometimes sends out auditors and inspectors to make sure the reports it is receiving are accurate. 

The laws DFI enforces are passed by our state legislature, but the enforcement details are spelled out through the rulemaking process. Rules have the force of law, but are crafted by an agency. 

Guidance documents do not have the force of law. Instead, they are meant to provide everyone with insight into how the DFI is enforcing the laws and rules already on the books. 

What Is Changing? 

DFI’s emergency guidance on prohibited debt collection practices stresses that DFI is not making new rules, it is just slightly changing how it interprets existing state law in light of the pandemic:

“Chapter 427 of the [Wisconsin Consumer] Act specifies prohibited practices when attempting to collect payments under consumer credit transactions, including any “conduct which can reasonably be expected to threaten or harass the customer or a person related to the customer.” Wis. Stat. § 427.104(1)(h). The drafters of the Act did not define “harass,” but dictionaries at the time of its enactment defined it as “to annoy continually” or “disturb persistently.” This broad, context-dependent meaning allows flexibility for courts and this Department to account for new economic conditions.

“Those new conditions have arrived… Many consumers who made pre-pandemic credit purchases were planning to make payments with revenue earned this spring. For millions, that work has now been cancelled or indefinitely postponed. Affected families are rationing financial resources until this crisis abates, reserving them for food, medicine, and other essentials. They’re going to miss payments on consumer credit transactions, through no fault of their own, because that is the rational thing for them to do.

“Debt collectors aren’t going to be able to talk people into behaving irrationally, no matter how many times they call. To repeatedly “disturb” or “annoy” them anyway is the definition of harassment…”

What Does This Mean?

This guidance is the government’s way of saying it cannot totally stop debt collection during the coronavirus pandemic, but that it thinks debt collectors should stop of their own accord because the DFI may decide it is harassment. 

“Debt collectors who routinely rely on telephone calls as a debt-collection tactic should be forewarned: whether the conduct “can reasonably be expected to threaten or harass a consumer” depends on the context, and the worldwide context just shifted dramatically. Practices that may have been typical or customary under normal conditions may be deemed harassment under conditions of a global pandemic.”

The guidances goes on to say, “We cannot draw a precise boundary between permitted or prohibited communications with debtors, because each must ‘be considered in context.’”

This is not a helpful explanation. Clearly, the government is trying to persuade creditors to stop debt collection efforts. 

At Hanson & Payne, we are advising our clients to keep this guidance in mind. We are keeping a close watch on DFI’s actions, and monitoring how creditors and debtors across the state are responding to this guidance. Please contact our office if you have questions. 

When Things Go Back To Normal

The coronavirus pandemic is the most devastating disease to hit the world since the 1918 flu. Thousands of people have died, and millions more have seen their lives disrupted. Experts are predicting that it may take years for things to go back to “normal.” However, it is becoming increasingly clear that there is no universally agreed-upon definition of “normal,” particularly in the business world. 

COVID-19’s Impact On Business 

We have all made changes in our personal lives to protect ourselves and others from spreading this deadly virus. Lost in the focus on canceled social events and binge-watching tv is a recognition of how drastically our work lives have changed as well. 

Staff has been cut so only essential employees are in the office. Some businesses are discovering that nonessential employees really are nonessential, and those people may never be hired back. 

Businesses have embraced telework, which may never have become the norm otherwise, but is now showing its value. The line between work time and leisure time is growing ever more blurry. 

The government has forcibly closed a number of businesses. Owners wonder whether consumers will ever return after discovering they can do without, or find similar products and services online. 

A New Normal

When all this is over, normal is going to look very different thanks to these and other changes. At Hanson & Payne we are prepared to help businesses in the Milwaukee area adjust to the new normal. We believe bankruptcy will be an important tool for many companies adjusting to post-corona life. 

Bankruptcy Is A Tool

Bankruptcy is often used by struggling businesses to restructure and get back on their feet. Chapter 11 of the bankruptcy code was specifically designed for this purpose. 

Chapter 11 is used by companies who are not ready to throw in the towel just yet. While a Chapter 11 case is pending, a filer has the freedom to attempt to negotiate new contracts with creditors, landlords, and labor unions. Negotiations like these are going to be particularly important as businesses struggle to get back up and running at full capacity. 

A company may also use Chapter 11 as an opportunity to settle pending litigation if it is facing unknown liability. The fear that the business will completely shut down if negotiations are unsuccessful gives the filer some leverage and motivates everyone to make a deal. 

Contrast this with a Chapter 7 bankruptcy, where the goal is winding down operations. Assets are sold off, creditors paid whatever is possible, and then the business is shuttered. There is no attempt to keep the business going, even though parts of it might be profitable if they are sold off.

Milwaukee’s Bankruptcy Firm 

Hanson & Payne, LLC is a trusted advisor to businesses in the Milwaukee area. We have a reputation for being business-minded in an industry that is often criticized for not understanding that legal action is a means to an end, not an end in and of itself. If you are looking for legal counsel in this challenging time, we would be honored to take your call. Contact us today to schedule an initial consultation.