June 20, 2019

Moving Through the Python, Bankruptcy Cycles

BPyth_20030207_6085abpaYesterday’s Charlotte Observer article (wherein I’m quoted) explains why we’re only seeing the front end of the bankruptcy python for real estate developers, small businesses and individuals.  While the Western District of North Carolina has seen more bankruptcy filings in eight months of this year than in all of 2008, most experts expect filings to increase through 2010 and pass all previous records.

Any schoolchild who’s been to a zoo and seen a snake with a lump in its midsection knows that the lump used to be a live animal.  Once the snake swallows its prey, its movements are limited and all its bodily functions re-prioritize around digestion.  Some snakes’ hearts and livers increase in size to facilitate the process.

Bankruptcies always come in waves

Today’s economy is force-feeding the bankruptcy python: developers who can’t pay their subcontractors force the subs into bankruptcy.  Most small contractors and subcontractors are owned by individuals who guaranteed the business’s debts and will eventually seek personal bankruptcy protection. Bankruptcies always come in waves.

Just like the snake in digestion, huddled away instead of roving about, the construction sector, including builders,  developers, suppliers, employees and subcontractors, will be sluggish and vulnerable until the bad debt comes out the other end of the bankruptcy python’s system.

What to do until the economy rebounds?

I advise everyone whose businesses are suffering and who don’t have strong financial resources to weather this economic storm to come in for proactive bankruptcy counseling.  Hopefully YOU won’t have to file for bankruptcy protection, but my law partner Heather Culp and I can walk you through scenarios and help you plan for contingencies, including creditor negotiation.  If an orderly winding down of your business makes sense, we’ll advise you on the best way to go about it — with or without bankruptcy protection.  Anyone feeling financially vulnerable needs to think through asset planning and protection.

If you are struggling to collect debts from business in bankruptcy or financial difficulty, consulting with our offices might increase your chance of collecting all or a large portion of what’s owed.  We’re bankruptcy experts, therefore, we know how to effectively collect from those in the bankruptcy process.