What Happens To Leased Equipment During Bankruptcy?

Many businesses in the Milwaukee area choose to lease equipment rather than purchasing it. The Hanson & Payne team frequently assists our clients as they negotiate equipment lease agreements, extend or modify existing leases, and deal with the issues that arise when a lessor or lessee is in financial distress. 

Most equipment lease agreements are pretty straightforward. The lessor loans out equipment, for a specific period of time, for a set price, to the lessee. A typical contract also covers issues like equipment maintenance and who is responsible for removing and returning the equipment at the end of the lease. 

What is not always covered by the contract, but really should be, is what happens when things don’t go as planned. Specifically, what happens if either the lessor or lessee runs into financial difficulty? 

When Things Don’t Go As Planned

Under a properly drafted contract, the lessor should have the right to terminate the lease and recover its equipment if the lessee fails to make a payment. A properly drafted contract should also protect the lessee if the lessor runs into financial trouble. There is nothing worse than a healthy business being threatened because someone it does business with fails to live up to their end of a bargain. 

If at all possible, an equipment lease should be terminated before a bankruptcy case is filed. Bankruptcy courts will sometimes decide an equipment lease is actually a form of secured financing, and make sorting out who owns and owes what more difficult than it otherwise needs to be in the name of fairness to other creditors. 

Sometimes Bankruptcy Cannot Be Avoided

If either party files for bankruptcy while the equipment lease is still intact, and the court recognizes it is a lease and not an alternative financing agreement, the parties will need to negotiate a path forward. 

When a lessee files for bankruptcy, it typically has the option of assuming or rejecting the lease within 60 days of filing its case. A lessee that assumes its lease must cure any past defaults and prove that it is able to meet its obligations going forward. If the lessee chooses to reject the lease, or cannot meet the requirements it needs to in order to assume the lease, the lessor is entitled to recover possession of its equipment and make a claim for damages.

A lessee may be able to persuade the bankruptcy court to allow it to purchase equipment it has previously been leasing from a bankrupt lessor. It may also seek damages for harm to its business. 

Business-Minded Bankruptcy Attorneys In Milwaukee 

Whether you are a lessor or lessee, you need reliable legal counsel if you are going to enter into an equipment lease agreement. Hanson & Payne, LLC is a trusted advisor to many businesses in the Milwaukee area. We have a reputation for being business-minded in an industry that is often criticized for not understanding that working with an attorney is a means to an end. If you are looking for counsel on an equipment lease issue, please contact us today to schedule an initial consultation.

Badger Herald Highlights Dilemma Faced By Wisconsin Farmers

A recent article in The Badger Herald took a deep dive into an issue that threatens the very identity of the Badger State — farm bankruptcies. As the title of the article suggests, there is enormous pressure in the agricultural industry, and on dairy farms in particular, to “go big or go bankrupt.” 

The article details how the rise of corporate-owned farms and the preference of large food producers to work with a smaller number of larger suppliers is crushing the small family farms that built Wisconsin into America’s Dairyland. 

The Data Shows Dairyland Is In Distress 

The data is quite shocking, even for those of us at Hanson & Payne, who spend the majority of our time working on Milwaukee area bankruptcy cases and keeping up with trends in the bankruptcy system

The article, quoting Family Farm Defenders Executive Director John Peck notes “Wisconsin lost half of its dairy farms since the turn of the century and that large, corporate-contracted factory farms currently control 25% of the market, despite accounting for less than five percent of the state’s dairies. In 1987, the average number of dairy cows per farm was 80. Just 15 years later, that figure reached 275.”

Despite the drop in the number of farms, the amount of milk produced is increasing. “Nationwide dairy production rose by a factor of roughly 100,000 lbs between 2005 and 2018, even as the U.S. lost over 10,000 farms during the same period.” 

Supply And Demand Are Pushing Family Farmers Out Of Business 

An increasing supply drives down the price small farmers can sell their milk for, which puts even more financial pressure on them. “The cost of producing milk in Wisconsin was $22.70 per hundredweight in 2020, yet the price of milk reached as low as 12.95 per hundredweight during the same year.” This is simply unsustainable. 

Experienced Bankruptcy Attorneys Serving Southeast Wisconsin

At Hanson & Payne, we have worked with numerous farmers in Southeast Wisconsin who are trying to figure out how to cope with the challenges facing the dairy industry. We layout all of the options that are on the table, and help our clients select the one that works best for them. 

Whether our clients want to regroup and try to weather the current storm, or sell out and retire somewhere warm, bankruptcy is often the best path forward. Bankruptcy is a tool that can be used to help farmers find their feet. There are even special bankruptcy laws that apply just to farmers. 

Hanson & Payne’s experienced team of Milwaukee area bankruptcy attorneys know how difficult it is to consider filing for bankruptcy when you are a farmer. Farming isn’t just a job, it is a way of life. We understand this, so we work with our farming clients to find an outcome that they are satisfied with on a personal level instead of forcing them to focus solely on financials. If your farm is in financial distress, don’t hesitate to contact us. 

Scammers Target Milwaukee Area Residents Making New Year’s Resolutions

If getting your finances in order tops your list of New Year’s resolutions, you are in good company. Taking steps to better manage your money is a perennially popular resolution. Financial scammers know this and often ramp up their efforts to target new victims this time of year.

Each year, Hanson & Payne’s team of experienced Milwaukee area bankruptcy attorneys sees an uptick in the number of potential clients taken advantage of by scammers promising to help them get out of debt. Sometimes the scammers will take your money and run. Other times, they will fool you into thinking they are working hard on your behalf so you keep paying them. Meanwhile, they are pocketing your cash while you fall further and further into debt. 

These are some of the red flags to look for so you don’t get scammed: 

  • A debt relief company that demands upfront payment before it will do any work on your behalf. Many times these advisers will take your money and run. 
  • Companies or advisors that want your credit card or bank account information before they will explain what sort of work they can do on your behalf. 
  • Companies or advisors that ask you to fill out a third-party authorization form or power of attorney document. 
  • A debt relief company that guarantees it can eliminate or reduce your debt in a very specific period of time. There is no set timetable for this sort of work. It is often very time-consuming, and never guaranteed to be successful. 
  • Advisers that tell you to cut off communication with your creditors. This should only be done after you have started to work with a bankruptcy attorney, who will talk to your creditors on your behalf. 
  • Using high-pressure sales tactics to make it seem like you will miss out on an opportunity if you don’t agree to work with them right away. 
  • Companies with pompous-sounding names that send you letters with fancy seals and logos. 
  • Websites, letters, emails, or texts with spelling or grammatical errors throughout them can indicate the person who wrote them is a scammer. 

If someone uses one of the tactics above on you, you should consider reporting them to the Federal Trade Commission at ReportFraud.ftc.gov.

In addition to watching out for these red flags, the best way to avoid getting scammed when looking for financial advice is to work with a certified financial planner or seek credit counseling from one of the credit counselors approved by the bankruptcy court to serve debtors in the Eastern District of Wisconsin. Working with one of these approved credit counselors has the added benefit of giving you a bit of a head start on the bankruptcy process if it turns out that bankruptcy is your best path forward. All filers are required to go through court-approved counseling before the bankruptcy court will hear their case. 

If it seems like bankruptcy may be the best option for you, or you have questions about bankruptcy, the Hanson & Payne team is here for you. We help Milwaukee area residents, businesses, and creditors navigate the bankruptcy system. Please contact us today to schedule an initial consultation.