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.

Loan Modification May Help Your Business Avoid Bankruptcy

One of the things that sets Hanson & Payne apart from other bankruptcy attorneys in the Milwaukee area is our experience working with creditors. We have a strong relationship with many of the major banks in the great Milwaukee area because we have represented them in commercial loan transactions, bankruptcy matters, or insurance disputes at one time or another. 

While some debtors decide not to hire us after finding out we work for both debtors and creditors, the smart ones realize the edge our diverse practice gives them at the negotiating table. 

Over the years, we have developed strong relationships with the lenders and other attorneys whose cooperation and patience are a necessary component of any successful loan modification. We also know which lenders are willing to negotiate with a debtor in order to help keep a business afloat, and what sort of deals they have cut in similar situations. We put this knowledge to use for our business clients who wish to stave off bankruptcy and remain in business. 

If you are interested in seeking a business loan modification or workout, you need to be proactive. Don’t wait until you are several payments behind before taking action. (If you are already in default, take action right away.)  Lenders are more willing to work with “good” debtors who have been paying than those that they perceive as “bad” because they have missed a payment or two. 

Preparing to Talk to Your Lender

Reinforce your lender’s opinion that you are being proactive and addressing your financial problems head-on by doing some advance planning before giving your lender a call. 

First, gather up relevant financial documents: 

  • All the documents related to your current loan;
  • Recent tax returns;
  • Bank statements;
  • Your current business ledger; and 
  • Anything else you think might be helpful. 

Every lender handles their modifications differently, and one lender may require less or different information than another, but having as much information as possible on hand shows you are taking this seriously. 

It is also a good idea to update your business plan. Be prepared to show your lender how you intend to address the issues you are facing and increase your profits over the long-run. 

Finally, you will need a hardship letter explaining your current situation. This letter is something we suggest working on with someone who has loan modification experience. It needs to succinctly explain your situation, using facts and figures to bolster your request. 

While we always recommend getting professional help if you are seeking a loan modification, we urge you to be cautious about who you rely on for assistance. There is a whole industry of “loan modification specialists” who make it sound like they are particularly skilled at modifications. The truth is, most of these people are nothing more than paper-pushers who serve as a middleman between you and your lender. They cannot offer legal advice, and their financial advice is suspect at best because they are not regulated or licensed. The worst of these folks are scam artists who are looking for easy identity theft targets. 

Our firm has many years of experience seeking loan modifications on behalf of business owners in the Milwaukee area. If you are interested in seeking a modification, but you don’t know where to start, start by contacting our office to schedule an initial consultation.  

Are the Boy Scouts Dodging Responsibility By Filing For Bankruptcy?

The Boy Scouts of America (BSA) has a rich history in the Milwaukee area. There are over 8,000 scouts in Kenosha, Milwaukee, and Racine counties, and they do lots of merit-badge earning and community service. When the BSA declared bankruptcy earlier this year, many people feared that the organization would soon cease to exist. Others suggested the bankruptcy was allowing the organization to shirk responsibility for the harm it has caused. 

The reality is the bankruptcy is probably a boon to the struggling organization and is a way for the BSA to finally take responsibility for its actions instead of sweeping them under the rug. 

What Led to the BSA’s Bankruptcy?

The BSA has been in decline for decades. Its membership peaked in the early 1970s. In recent years, it has tried to boost membership by allowing girls and openly LGBTQ scouts to join its ranks. These changes have helped a little bit, but they also caused the Mormon church to pull its support from the organization and start a competing group. 

Bankruptcy will allow the organization to restructure and move forward with a new vision for the future. What this means for local councils is unclear. It is possible that the BSA will consolidate councils, lay off staff, and sell off some of its campgrounds. We’ll have to wait and see what happens. 

Hopefully, the organization will also take its time in bankruptcy to do some soul-searching. Almost since its founding, over 100 years ago, BSA knew it was a magnet for sexual predators looking for easy access to young boys. Instead of calling attention to the problem and attempting to do something about it, the BSA kept secret files on volunteers it knew or suspected were abusing scouts. They rarely shared any of the information they had with the police. 

One of the only things BSA did to try and curb abuse was ban LGBTQ scouts and volunteers. It only recently acknowledged that being queer does not make you a sexual predator.

Now, the day of reckoning has come. The BSA was forced to file for bankruptcy because it was being hit with so many lawsuits by abused scouts. If the organization continued to fight each of these cases individually, it would be bled dry. 

Why This Matters

Filing for bankruptcy will allow the organization to address the claims against it head-on. Other organizations in similar circumstances have set aside pots of money that victims can make claims against under the supervision of the bankruptcy court. The victims will have a quick and easy way to make a claim for compensation, and the organization will take a hit, but be able to regroup. 

It is important to note that if this is indeed what happens, victims will only have this one shot at justice. The bankruptcy takes all potential and outstanding claims and rolls them into one. This is why some people claim BSA is shirking its responsibility. This is a valid concern, but it is also likely that many abused scouts would not make any claim at all if the bankruptcy did not happen. They would either suffer in silence because bringing your own individual lawsuit is quite the undertaking. Or they would file suit too late, and the organization would be out of money and closed down by the time their lawsuit was tried to a verdict.

If you have questions about the Boy Scout Bankruptcy, or how bankruptcy impacts liability, let’s talk. Contact us today to schedule an initial consultation. 

Milwaukee May Soon Lose A Bankruptcy Judge

There may soon be a vacancy on the bench in the United States Bankruptcy Court for the Eastern District of Wisconsin. Judge Brett Ludwig, who currently serves as a bankruptcy judge here in Milwaukee, has been tapped by President Trump to fill a long-vacant seat on Wisconsin’s federal district court. This is quite the promotion. 

Moving On Up? 

However, Judge Ludwig is not switching offices just yet. His appointment must be confirmed by the United State’s Senate. According to the Milwaukee Journal Sentinel, Wisconsin Senators Tammy Baldwin (D) and Ron Johnson (R) both approve of Ludwig’s nomination. Their bipartisan support is a sign that Judge Ludwig’s confirmation is likely, although the timeline is uncertain. 

Judge Ludwig has served as a bankruptcy judge since February 2017. Prior to that, he was a partner at a large Wisconsin law firm. He is a graduate of University of Wisconsin-Stevens Point and the University of Minnesota Law School.

As mentioned above, if Ludwig is confirmed, he will fill a federal court judgeship that has been vacant for some time. He would be taking the place of Judge Rudolph Randa, who passed away in 2016. It is not uncommon for federal district court seats to sit vacant because there can be political hurdles to filling them. 

Switch Would Open Up A Seat On Milwaukee’s Bankruptcy Court

Thankfully, bankruptcy court seats are not typically so difficult to fill. While federal district court judges must be appointed by the President and confirmed by the Senate, U.S. bankruptcy court judges are appointed by a majority vote of the circuit court judges in the jurisdiction in which they sit. It typically takes around six months for a new judge to be appointed when a bankruptcy court vacancy opens up. 

One reason for this difference in selection is that bankruptcy court judges are not awarded lifetime tenure. Instead, they are appointed to renewable 14-year terms. In practice, many of these judges end up serving multiple terms, often until they retire. It is understandably difficult to resume private practice after being in public office for over a decade. 

A Full-Service Bankruptcy Firm

The Hanson & Payne team is paying close attention to Judge Ludwig’s nomination, and any potential bankruptcy court vacancy that may open up should he be confirmed as a district court judge. We will notify any clients who have cases before him if he is suddenly swept into his new role. We will also alert our clients if it appears a vacancy on the bankruptcy court is impeding court operations, and slowing down cases. 

If you are a Milwaukee area resident or business who is considering filing for bankruptcy, the Hanson & Payne team is ready to help. Our experienced attorneys handle both personal and commercial bankruptcies. We also do quite a bit of work for creditors and local banks. Please contact our office today to schedule an initial consultation. 

Bankruptcy Saves The Bull From Sheriff’s Sale

Five years ago, Golf Digest named The Bull at Pinehurst Farms, located in Sheboygan Falls, one of the top 70 public golf courses in America. This year, the Jack Nicklaus designed course was almost sold at a sheriff’s sale. The sale was called off minutes before it was scheduled to start because the course’s owners filed for Chapter 7 bankruptcy.

How Did Filing for Bankruptcy Save the Golf Course?

The Sheboygan Press is reporting that a minority owner of the course is attempting to pull together enough financing to buy it. Filing for bankruptcy gives the potential buyers more time to put together a deal. “Richard Hahn — the attorney for The Bull’s creditor, Wisconsin Bank & Trust — said that The Bull and its owners have been unwilling to pay what is actually owed on the loan. The default on the loan is around $4.2 million, but Hahn said the owners are willing to pay about half of that. That won’t cut it for the bank, he said.”

It will be interesting to see what happens to this course for several reasons. 

First, we are seeing several courses in Wisconsin close due to golf’s declining popularity. Younger folks find the game too slow, long, and expensive. This is changing the golf industry in a big way. 

Due to golf’s decline in popularity, it is going to be harder for developers to get financing for golf course building and development. This puts a crunch on the middle of the market. We’ll always have the American Club on one end of the spectrum, and mini golf in the Dells on the other, but what will be left for the rest of us? This is the second reason it is going to be interesting to see what happens to The Bull. 

Finally, this is a very public example of one of the ways Chapter 7 can be used by business owners to help them hold on to their property. In this case, a minority owner is looking for financing in order to buy the property from the majority owners and current creditors. This is not an uncommon occurrence. Business owners frequently use Chapter 7 to get a fresh start or, as in this case, buy themselves some time to get their financial house in order. 

Individuals can also use Chapter 7 as a sort of financial reset button. While Chapter 7 bankruptcies are often called liquidation bankruptcies, when an individual files under this chapter it is more about wiping the slate clean of debt than getting rid of excess inventory, property, or contractual obligations. 

Who can file for Chapter 7 Bankruptcy? 

The ideal Chapter 7 candidate will have primarily unsecured debt (ex. credit cards, medical bills, utility bills, payday loans, etc…) and be current with any secured debt payments such as mortgage and car/lease payments. If this is the case, the individual will typically be permitted to exempt (or keep) most of their personal property. 

Our firm files a lot of Chapter 7 bankruptcies, for both businesses and individuals. If you are in financial trouble, and think bankruptcy may be in your future, let’s talk. Contact us today to schedule an initial consultation. 

New Rules For Small Businesses Who File Bankruptcy Under Chapter 11

When Goldilocks enters the home of the three bears, she searches for creature comforts that are “just right” for her. Her story involves a lot of trial and error — not to mention breaking and entering, and risking the wrath of a family of bears — but children who hear the tale are delighted when she finds something “just right.” There’s something inherently satisfying about finding the right fit after a quest that children are quick to latch on to, and the morally ambiguous tale gives them permission to compare, contrast, and find things in this world that are “just right” for them. 

Until recently, small businesses going through the bankruptcy process were like a bunch of frustrated Goldilocks who never found anything “just right.” Filing under Chapter 7 meant liquidating assets and shutting down while filing under Chapter 11 often proved too cumbersome or expensive to manage. 

A new federal law, The Small Business Restructuring Act of 2019 (SBRA), which is also being referred to as Subchapter V, has created a new bankruptcy process designed to be “just right” for small businesses. 

Understand SBRA

The SBRA fast-tracks the bankruptcy process and allows for far greater flexibility in negotiating restructuring plans with creditors. It also specifies that a trustee will work with the small business debtor and its creditors to facilitate the development of a consensual plan of reorganization. 

It is the role of the trustee that makes the SBRA process really different from other chapters of the bankruptcy code a business can file under. The trustee is supposed to take a very hands-on role, much like that of a trustee in a Chapter 12 or 13 case filed by an individual. 

According to the Department of Justice, it has hired around 250 of these trustees so far. “These trustees offer a diverse set of business, accounting, turn-around management, and legal skills.  In addition, the USTP developed a comprehensive manual and handbook to guide staff and subchapter V trustees in carrying out their new SBRA responsibilities; provided extensive training to staff, subchapter V trustees, bankruptcy professionals, and others interested in the new law; and coordinated with the bankruptcy courts on administrative issues to ensure a successful implementation.”

Small Business Debtor

Only a “small business debtor” may elect to proceed under the SBRA. A small business debtor may be an individual, partnership, or corporation that: 

  • Is engaged in commercial or business activities;
  • Has no more than $2,725,625 of total debt; at least 50% of which must be from the business or commercial activities; and
  • The debtor’s principal activity cannot be a single-asset real estate operation.

A debtor that meets these criteria may voluntarily elect to file under Subchapter V of Chapter 11. 

At Hanson & Payne, we are eager to help small business clients who feel this new process may be “just right” for them. If you would like to schedule an initial consultation to talk about the benefits of the new SBRA bankruptcy process or discuss other options available to your business, please contact us.

The $10 Million Car At The Center Of A Wild Wisconsin Supreme Court Case

Last year we blogged about a pending Wisconsin Supreme Court case involving a rare car stolen from a Milwaukee factory. The case was recently decided, and the ruling is going to have a big impact on other replevin actions filed in Wisconsin. 

Replevin Recap

As we explained in our previous blog post, replevin is a legal action. It is brought by a plaintiff who believes the defendant has wrongfully taken or failed to return a piece of personal property — which means any sort of thing except land. The plaintiff wants the property back, and may also want paid damages for the hassle of getting their property back.

At Hanson & Payne, we are often involved in cases where a replevin action is filed. We work to get the disputed property into the rightful owner’s hands. We have represented both debtors and creditors in replevin cases.

The Talbot Lago

It is rare that a replevin case goes all the way up to the Wisconsin Supreme Court, the highest court in the state, so we have been closely following the case Mueller v. TL90108 LLC. It does not hurt that the case sounds like a cross between a Bond movie and a John Grisham novel. 

In 2001, thieves broke into the old Monarch Plastic Products factory on Milwaukee’s lower east side and stole a disassembled French sports car that its elderly owner had been trying to restore since 1967. The car, a 1938 Talbot Lago T150 C teardrop coupe, was worth an estimated $7 million.

Not only was the car stolen, so were all the documents and spare parts related to it. Other valuable items in the factory-turned-garage were not touched. There was no sign of forced entry, but in a sinister turn of events, the phone lines to the owner’s house were cut the same day the car was stolen.

In 2005, the car’s owner passed away. He left his entire estate, including the rights to the stolen car, to his cousin, Richard “Skip” Mueller. A few years later, Mueller sold a majority share of the right to own the car to Joseph L. Ford III, who has experience tracking down rare stolen cars.

Then things went quiet, and it seemed like the car was gone forever. But in 2016, the authorities alerted Mueller and Ford that someone was trying to title a now completely restored Talbot with the same chassis number in Illinois!

Mueller and Ford demanded the return of the stolen car, but the man who had purchased it, Rick Workman, refused. Workman claims he had no idea the car was stolen. He purchased it in good faith from a European dealer.

In February 2017, Mueller and Ford filed a replevin action against the company Workman used to purchase the car, TL90108, LLC.

It’s a case that fits the definition of replevin to a T. Mueller and Ford, the plaintiffs, are the rightful owners of a piece of personal property, the Talbot Lago. They are suing the defendant, TL90108, LLC, for the return of the vehicle.

Lower courts couldn’t agree on what should happen to the car. Wisconsin’s replevin statute gives plaintiffs a six-year window to file a case, and the various parties had different ideas about when that six-year countdown should begin. The Wisconsin Supreme Court agreed to take the case and clarify when the clock starts ticking in replevin cases. 

What The Court Said

The Court ruled that the six-year clock started ticking when Workman purchased the Talbot Lago through TL90108, LLC in 2015. 

According to the ruling, the trigger is the beginning of the wrongful detention by a defendant, not the original theft, not the plaintiff’s discovery of the defendant’s possession of the item, and not the timing of the plaintiff’s demand of the item’s return. 

What This Means 

This case is going to be important because it opens the door for people like Mueller and Ford, who lost track of the property that was taken from them for a number of years, to bring a replevin action once the property is rediscovered. 

For creditors, or anyone that handles the sale of second-hand goods or repossessed goods, this case underscores the importance of ensuring the property you are claiming is rightfully yours. You open the clients you transfer repossessed or second-hand property to up to liability if the item you are transferring does not have a clear title. 

Our firm will continue to be involved in replevin cases, representing both debtors and creditors. We doubt we will ever see a case as wild as this one, but we do expect to cite this case going forward. If you think you have the makings of a replevin case on your hands, don’t hesitate to contact our office

Got Milk? Markets Push More Farmers & Food Processors Into Bankruptcy

The Milwaukee Journal Sentinel reports that sales of milk as a beverage have barely risen since 1985. Part of that is due to increased competition. “Beverage companies, seeking to please a multitude of palates, flooded the market with sports drinks, energy drinks, plant-based sodas, fruit juices and designer coffees… Just in the last half-dozen years, the average grocery store has added nearly 600 new beverage options to its coolers and shelves…” 

The result is a glut of milk and a corresponding drop in milk prices that are driving family farms and food processing companies that specialize in dairy products out of business. 

Wisconsin’s Dairy Herd Dwindles, Farmers Are Filing for Bankruptcy More Often

Numbers released by the Wisconsin Department of Agriculture, Trade, and Consumer Protection showed the Dairy State lost 10% of its herds in 2019 alone. Some farmers are simply closing up shop, while others are being forced to file for Chapter 12 bankruptcy

Chapter 12 is a special chapter of the bankruptcy code that was enacted specifically so that “family farmers” and “family fishermen” can file for bankruptcy without losing all their assets and giving up their way of life.

Chapter 12 bankruptcies are like Chapter 11 or Chapter 13 bankruptcies in that the goal is to reorganize operations and repay debts on a payment plan. However, Chapter 12 is simpler and less expensive to file under than Chapter 11, which was designed with large corporations in mind. Compared to Chapter 13, Chapter 12 is better at dealing with the large debts and less predictable income that characterize family farming and fishing operations.

At Hanson & Payne, we are helping several farming families in Southeast Wisconsin determine what the best path forward for them may be. We don’t push our clients to file for bankruptcy. We lay out all of the available options and discuss the pros and cons so our clients can make the decision that is best for them.

Food Processors Are Also Facing Bankruptcy 

In the last few months, two major milk buyers have filed for bankruptcy — Borden Dairy Company and Dean Foods. As we have often said on this blog, one bankruptcy can often cause a chain reaction. 

The farmers Borden and Dean bought from must now find new buyers. Companies that depended on Borden and Dean products must now find new suppliers. A delay could cause financial distress on either end of that chain. 

If Borden and Dean are unable to make payments to their suppliers, they may end up pushing others toward bankruptcy. 

At Hanson & Payne, we are skilled at working with businesses that have a disruption in their supply or customer chain. If your business is in this situation, we can help you find a path forward. That path does not have to include bankruptcy. Our firm is skilled at negotiating workouts and working with commercial lenders. 

Moo-ving Forward 

The milk market is undergoing a lot of changes right now, but in the long-run, Wisconsin will always be America’s Dairyland. Our firm is ready to help farmers, food processors, and others in the dairy industry move forward and adapt. If you need assistance in this area, please contact us to schedule an initial consultation. 

Shopko Optical Is Thriving Post-Bankruptcy

Shopko stores are gone, there’s no more Shopko gate at Lambeau Field, yet Shopko optical lives on. How is this possible? Dividing up or selling off parts of a business is a common practice in the bankruptcy courts. 

When Shopko filed for bankruptcy last year, its plan was to downsize, reorganize, and regroup while remaining in business. To that end, the company filed for bankruptcy under Chapter 11 of the bankruptcy code

What Is Chapter 11?

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. It may also 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.

Why Did shopko file for bankruptcy

Shopko was unable to find a way to restructure its business so it could be successful going forward. It’s only choice was to shut down. It ended up being more like a Chapter 7 case than a Chapter 11 case. 

While Shopko as a whole was going through the bankruptcy process, Shopko Optical was spun off as a separate entity. The people who worked in these locations kept their jobs, and the patients kept their access to care. It is a bankruptcy success story. And it is not an unusual one. It is common for bits and pieces of businesses to be bought and sold while their parent company is going through the bankruptcy process. Some businesses will file for bankruptcy just for the flexibility it gives them to restructure in this manner. 

How We Can Help You

Our firm frequently helps Wisconsin business owners sell or acquire a piece of a larger company. We have helped negotiate such sales, and done due diligence checks for buyers, sellers, and commercial lenders. We also have extensive experience protecting the interests of lenders in these situations. At the time a commercial loan is written, we anticipate problems and make sure that the loan documents adequately protect our client in the event its customer falls into insolvency.

Our well-established ability to protect our clients’ interests and keep them informed of what to expect in an insolvency proceeding is what drives businesses and commercial lenders from all over Wisconsin to rely on Hanson & Payne when they find themselves in the unfamiliar territory of a state court receivership or a bankruptcy court. If you are in this situation, we are ready to help. Please contact our office today to schedule an initial consultation.