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Unusual times continue for Miami-Dade businesses and personal bankruptcy cases.
Contributing factors that are causing local small businesses to file for bankruptcy include increasing interest rates, supply chain issues, inflationary issues and world instability, said Joseph Luzinski, senior managing director for Development Specialists Inc.
“Not only the cost of goods to operate a business are going up, but the cost of financing is going up as well,” he said. “I think a lot of businesses have been hanging on by their fingernails, and without any additional money by the government, businesses are inevitably going to be more prone to fail.”
As a result of the pandemic, the 2020 CARES Act temporarily increased the debt limit of Subchapter V of Chapter 11 from $2.7 million to $7.5 million, with the purpose of allowing small businesses with debt in excess of the previous debt limits to qualify for reorganization under the Small Business Reorganization Act.
“It was faster and easier for small businesses to get in and theoretically reorganized more efficiently,” said Michelle Hendler, partner and co-chair of the creditors’ rights practice group for law firm Shutts & Bowen.
In March, the temporarily increased debt limit of Subchapter V of Chapter 11 expired and the debt ceiling is now back to what it was originally, at $2.7 million, she said. Comparing this time last year, Chapter 11 filings are down 16%, Chapter 7 filings are also down 34%, while Chapter 13 cases are up 30%.
Chapter 7 provides for the sale of a debtor’s nonexempt property and the distribution of the proceeds to creditors, according to the US Courts website.
Chapter 11 provides for the reorganization, usually involving a corporation or partnership, and Chapter 13 consists of the adjustment of debts of an individual with a regular income and the debtor can keep the property and pay over time.
Credit card debt is the real key that drives a lot of consumer bankruptcy, Mr. Luzinski added.
“Consumers are probably leaning more towards bankruptcy as their debt increases or as their credit card debt increases based upon not necessarily on new purchases but on the interest rate carry,” he said, “but I would say the business side is probably a little bit more risk for much higher bankruptcy activity than the consumer side.”
https://www.miamitodaynews.com/2022/04/12/individual-debtor-bankruptcy-cases-up-30-in-year/
