Iron Horse Hotel Motors On Despite Bankruptcy

Earlier this summer, Milwaukee’s popular Iron Horse Hotel filed for Chapter 11 bankruptcy. The much-lauded, motorcycle-themed lodge plans to stay open while its case proceeds, which is not unusual and is probably a good thing for the Walker’s Point neighborhood. 

Although Hanson & Payne is not involved in the case, it is one we are keeping an eye on since the hotel is a well-known Wisconsin business, and Chapter 11 filings give you a glimpse behind the curtain. 

Why The Iron Horse Hotel Filed for Bankruptcy

The Iron Horse has been welcoming guests at its Florida Street location, just across the bridge from the Harley-Davidson Museum, since 2008. The former Coakley Bros. Inc. warehouse has around 100 guest rooms, two banquet facilities and two restaurants. 

According to court filings, the hotel is valued around $28 million. Its largest debt is to its mortgage lender, which has attempted to foreclose on the property. Other creditors include a neighboring apartment complex which provides parking to the hotel, professional services firms, food and beverage suppliers, local construction companies, and the Small Business Administration’s Covid-19 Economic Injury Disaster Loan (EIDL) program.

Some of these debts, and the hotel’s legal and financial issues in general, appear to date back several years. However, hotel management is emphasizing the impact the COVID-19 pandemic has had on the establishment, and the rebound it has made. Ownership is adamant that the Chapter 11 process will allow the hotel to get back on its feet. 

Chapter 11 Provides A Path Forward 

Under Chapter 11, a business may renegotiate debts, terminate certain contracts, sell off assets, and downsize or shut down portions of its business while continuing to operate. This flexibility is designed to help struggling businesses turn things around and get back on track, and that is what the owners of the Iron Horse intend for it to do.

The hotel’s creditors have an incentive to work out an agreement and find a way to move forward because the alternative is seeing the debtor convert the bankruptcy from Chapter 11 to Chapter 7 and wind down operations. In that scenario, creditors are less likely to get repaid any of the debts they are owed, or may only get pennies on the dollar. 

Such conversions are not unusual. Many businesses that file under Chapter 11 and continue to struggle, even after taking advantage of the benefits that the bankruptcy law provides, end up converting to Chapter 7 and shutting down.

The Hanson & Payne team will be watching to see what happens in this case, particularly if the Milwaukee Economic Development Corp. gets involved. 

Milwaukee Bankruptcy Lawyers You Can Trust

Bankruptcy opens new opportunities and can allow a company on the edge to survive and thrive. The business-minded legal team at Hanson & Payne has helped countless business owners and commercial lenders in the Milwaukee area navigate the bankruptcy system. 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.

Wisconsin Bankruptcy Filings Dropped Over the Past Year

While we are well on our way through Q3 of the calendar year, the Administrative Office of the U.S. Courts has just released its data on the number of bankruptcies filed through the end of the latest fiscal year. 

Across the country, “Personal and business bankruptcy filings took a sharp drop in the twelve-month period ending June 30, 2022, falling 17.7 percent compared with the previous year.” There were 380,634 bankruptcy cases filed in the year ending June 2022, compared with 462,309 cases filed in the previous year. 

While it is always interesting to take a look at nation-wide trends, Hanson & Payne is a Milwaukee-based bankruptcy firm that primarily serves the needs of businesses and families in the Southeastern corner of the state. So, we like to take a bit of a deeper dive into the Wisconsin and Milwaukee area data. 

A Closer Look at Wisconsin

Across the state of Wisconsin, 8,049 bankruptcy cases were filed from June 2021-22. This is a 23.2% drop from June 2020-21, when 10,508 bankruptcy cases were filed. 

Of the bankruptcy cases that were filed in Wisconsin over the past year, only 161 of them were business bankruptcies. The vast majority — 7,888 cases — were non-business bankruptcies, including personal bankruptcies and farm bankruptcies.

What’s Going on in the Milwaukee Area

Milwaukee County, as usual, led the state in the number of bankruptcies filed by county. There were 2,841 bankruptcy cases filed here over the past year. That’s 35.3% of the cases filed across the whole state. 

22 of the Milwaukee County cases were business-related, while 2,819 were filed by people attempting to clear personal debt. 

Even controlling for population density, the Milwaukee County data is eye-popping. The region as a whole, looks a bit better. Other counties in the region saw the following number of bankruptcies filed over the past year:

Racine – 309

Ozaukee – 77

Waukesha – 382

Sheboygan – 129

That means as a region, the Milwaukee area had 3,738 or 46.4% of the state’s 8,049 bankruptcies.

Milwaukee Bankruptcy Attorneys You Can Trust

According to the Administrative Office of the Courts, “Bankruptcy filings have fallen almost steadily since peaking in 2010. That trend has accelerated since the pandemic began in early 2020, despite some early COVID-related disruptions to the economy.” Looking back at past posts we have written about bankruptcy data shows this is true in Wisconsin as well. 

The Hanson & Payne team will continue to monitor bankruptcy trends across the country and in the Milwaukee area to ensure we can serve our clients well. 

We are a full-service bankruptcy law firm you can trust to handle your case with care. Please contact our experienced team of attorneys to schedule a meeting if you are in need of advice about bankruptcy, or representation in a pending case.

Crypto Investors Get A Crash Course In Bankruptcy Proceedings

The recent bankruptcies of the cryptocurrency trading and lending firms Voyager Digital Holdings, Inc. and Celsius Network LLC are giving many Milwaukee area residents a crash course in bankruptcy. Both firms froze their users’ accounts, and everyone wants to know if and when they will get their money back. 

Hanson & Payne is monitoring these cases because there are many people and businesses in Milwaukee investing in crypto, who are impacted by these cases, or may be involved in similar cases in the future. Our firm often represents creditors in bankruptcy cases, and we are curious if crypto creditors will be protected during bankruptcy proceedings since one of the selling points of crypto is that it is outside the traditional financial system. 

In a Typical Bankruptcy, Creditors Get Paid Back Based on Priority  

When a company declares bankruptcy, the court must figure out who gets what when any assets are distributed. 

The first debts to be paid back are those secured by a specific asset that was pledged as collateral. For example, say a business took out a loan to buy new equipment, and used its building as collateral. If the company declares bankruptcy, the creditor on the equipment loan will likely be able to claim the building during the bankruptcy case. 

If an asset has multiple liens against it, the court will look at the order in which the creditors contracted with the debtor. The first in time is typically the first in line for payment. 

The next set of creditors to be paid are those with unsecured claims against the entity that filed for bankruptcy. The court determines which of these creditors will get paid back by looking at each debt and determining its importance. The official name for this ordering of debts is priority. 

The higher the priority a debt is, the more likely it gets paid back. Claims that are higher priority are paid in full before claims considered lower priority receive anything. The priority of various claims is dictated by the Bankruptcy Code. 

The court will look through the documents each creditor has to figure out the debt’s priority, and other details like the amount owed. A creditor must have documentation to back up any claim they make against the debtor. 

Hanson & Payne often works with Milwaukee area businesses and lenders who are creditors in bankruptcy cases to document their claims and present them to the court. 

Figuring Out if Crypto Investors Have Priority

It is clear from the letters being written to the judges overseeing the Voyager and Celsius cases that the users of these services assumed the money they deposited was secure and could be withdrawn at any time, no matter what. It is now clear that that was not true. 

In fact, Celsius’ terms of use state that any funds deposited with the firm “may not be recoverable” in the event of bankruptcy. This means it is likely that users will be considered creditors of the lowest priority. They will likely get back pennies on the dollar if they are able to get any money back at all. 

Milwaukee Area Bankruptcy Lawyers You Can Trust

Hanson & Payne’s experienced team of bankruptcy attorneys have spent years representing creditors in bankruptcy cases, but we have never seen anything quite like these crypto bankruptcies. We are keeping an eye on them, and waiting to see if cases like this end up inspiring policymakers to amend our nation’s bankruptcy laws. 

If you are a Milwaukee area resident or business with questions about the rights of creditors during bankruptcy, please don’t hesitate to reach out.