More Than One Iron In The Fire

If you have run out of shows to binge-watch during the pandemic, we’ve got a recommendation for you. Milwaukee Blacksmith aired on the History Channel back in 2016 and is available to stream on Amazon. The show follows the Knapp family as they work on building their blacksmith business into something that can be passed on to the next generation. 

Throughout the series, the Knapps are always working on multiple projects. This creates challenges that drive the show’s narrative forward. Although some of the drama was probably amped up in order to make compelling reality television, it resonated with us. Most of our clients have more than one iron in the fire. 

Multipl Issues in Bankruptcy Are Common

Very rarely are the Milwaukee area businesses we assist face a single issue that is driving them toward bankruptcy. Oftentimes, several small issues have snowballed to the point that addressing them individually becomes impossible. By the time many business owners seek our advice on whether bankruptcy may provide a path forward, they are already facing several lawsuits. 

One of the benefits of filing for bankruptcy is that it is like hitting a giant pause button on all other pending litigation. Some of those cases will then get pulled into the bankruptcy case, while others are simply paused until the bankruptcy case is resolved. The official term for this legal timeout and shuffling of suits is an automatic stay. 

How Pushing Pause Keeps Things Moving Forward 

There are two reasons why stays are important from a public policy perspective. 

The first is the idea that nobody who has a claim against the debtor should be treated any better than others who are similarly situated. Pulling pending lawsuits into the bankruptcy case ensures that all creditors — instead of just the first to file — will get some sort of compensation. This also incentivizes settlement because those with a claim against the debtor get more information about the debtor’s full financial situation, and may discover that getting something through the bankruptcy process is better than getting nothing afterwards. 

The second reason the automatic stay is important is that it gives the debtor some breathing room. When a business is trying to use the bankruptcy process to restructure, pausing other legal actions is all but necessary. Creditors and those with claims against the debtor that will survive the bankruptcy have a better chance of getting something if the debtor can continue operations, so pausing things for a bit is really a win-win.

Milwaukee Bankruptcy Lawyers That Can Help You Hammer Things Out

Hanson & Payne, LLC is a trusted advisor to businesses, creditors, and commercial lenders in the Milwaukee area. Our experience working for these various parties gives us a keen insight into the negotiating that can be done while an automatic stay is in place. If you are looking for counsel that can help you strike while the iron is hot, we would be honored to take your call. Contact us today to schedule an initial consultation.

How Long Does It Take To File For Bankruptcy?

It’s been almost two years since the Wisconsin-based retail chain Shopko filed for bankruptcy, but some lingering issues related to its Chapter 11 filing are just now being resolved. Thankfully, most bankruptcy cases do not last this long. 

What’s Going On With Shopko? 

Shopko filed for Chapter 11 bankruptcy in January 2019. Their plan was to use the tools offered by Chapter 11 to downsize, reorganize, and regroup while remaining in business. However, it was unable to do so and ultimately had to shut down completely. The chain closed its doors in June 2019. 

Now, almost two years after its initial filing, and well over a year since it ceased operations, Shopko’s bankruptcy is still making headlines. The company has just reached a settlement with thousands of former employees who filed a class-action lawsuit seeking severance payments they allege they were promised but never received

“Shopko denies that it owes any severance pay. Nevertheless, Shopko has reached an agreement with the Class Representatives to settle the asserted claims for the entire class of similarly situated former employees,” reads the class action settlement announcement.

$3,018,434.78 will be distributed to the employees who are part of the class action and their attorneys. If any of the checks are not cashed within 180 days after issuance or returned as void, the funds will go to Brown County United Way and Feeding America Eastern Wisconsin.

Is This Typical? 

What is going on with the Shopko bankruptcy is not typical, but it is not unheard of. 

Businesses that file for bankruptcy under Chapter 11 are often successful at reorganizing and staying in business. If a business wants to shut down, or finds that it must shut down, it typically files under Chapter 7 or converts its Chapter 11 case to a Chapter 7 case. 

Most Chapter 11 cases wrap up within 6 months to 2 years. Shopko is still within that 2-year window, but it is pushing it. The COVID-19 pandemic has played a role in dragging out the case, but Shopko has also faced some unique challenges. Its reorganization plan was rejected by the bankruptcy court, it shifted from reorganizing to shutting down, and it has been dealing with the class action lawsuit discussed above. 

Most Bankruptcy Cases Do Not Last This Long

Even in the midst of the pandemic, most bankruptcy cases are resolved quicker than the Shopko case. Even seemingly complex commercial bankruptcies filed under Chapter 11 can be processed quickly if the reorganization plan is solid and creditors are on board with it or have filed a straightforward adversary proceeding that can be quickly resolved. Chapter 7 cases rarely take over a year to process. 

Hanson & Payne has years of experience helping businesses in the Milwaukee area navigate the bankruptcy process. We have represented companies filing for bankruptcy, creditors, and commercial lenders, and have a reputation for resolving cases quickly so everyone involved can move forward. If you are looking for a reliable and experienced legal team you can trust to swiftly guide you through what can be a complex and frustrating process, let’s talk

Adversary Proceedings: The L.O.L. Surprise Dolls Of The Bankruptcy World

L.O.L. Surprise! dolls are one of the hottest holiday gifts again this year. Kids are obsessed with collecting these cheap plastic dolls that come wrapped in layers upon layers of tissue paper which also hold little accessories, stickers, and secret messages. The unwrapping process mimics a YouTube unboxing video, which many kids are also obsessed with. 

Since there’s no way of knowing which doll you are purchasing based on the packaging, you can go from having a child who is wildly excited to extremely disappointed in a matter of minutes. For parents, that puts a whole different spin on the name L.O.L. Surprise! 

The emphasis on process and the semi-uncertainty surrounding the ending are entirely too familiar to those of us in the bankruptcy world. When a business files for bankruptcy you have a general sense of how things are going to work out in the end, but cannot predict exactly what will happen. 

Oftentimes the outcome of a business bankruptcy here in the Milwaukee area is shaped by an adversary proceeding, which is a lawsuit filed within the bankruptcy case. The Hanson & Payne team is frequently involved in adversary proceedings filed by creditors who want to protect their claims against a bankruptcy filer’s assets by preventing them from being discharged in the bankruptcy case. 

Examples of Claims in Adversary Proceedings

Some common examples of these claims include:

  • Creditors who want the court to determine whether their claim will be discharged in the bankruptcy or still stand after the case is closed in order to provide some certainty 
  • Claims arising from the debtor’s fraud or intentional misrepresentations 
  • A divorced spouse owed maintenance, or who is worried that their ex-spouse will not pay the debts assigned to them in the Marital Separation Agreement
  • Contractor theft claims, specifically in construction or development cases  
  • Claims arising from bad (bounced) checks
  • Claims between former business associates or affiliates
  • Claims against former employees for breach of a non-compete agreement or for theft/embezzlement
  • Actions taken by the bankruptcy trustee in order to recover gifts or transfers of property to friends or family members of the debtor in the 1-year period prior to the bankruptcy filing.

How these proceedings play out has a dramatic impact on the overall bankruptcy. For a debtor, an adversary proceeding may be the difference between coming out of bankruptcy with a clean slate or coming out still owing a significant amount of money to creditors. For creditors, the results of an adversary proceeding may play a big role in their own financial fate. As we often discuss on this blog, one bankruptcy may set off a chain reaction of bankruptcies as customers and suppliers see their own business disrupted. adversary-proceedings-the-lol-surprise-dolls

What determines the outcome of an adversary proceeding varies greatly from case to case. In fact, the list of claims that are not dischargeable in Chapter 7 cases is even different from the list of claims that are not dischargeable in Chapter 13 cases. If you have a specific question about a potential adversary proceeding, the best thing to do is contact an experienced bankruptcy attorney, like those of us on the Hanson & Payne team. We offer representation in all adversary matters and represent an equal share of debtors and creditors in such matters.