Gassman, Crotty & Denicolo, P.A.



Bankruptcy recordingAlan Gassman and Michael Markham46 minutesAlan Gassman 0:00 Good afternoon. It is March 31 2020. It's feeling like The Twilight Zone. I'm here in a rented house so that I can be quarantined. Mike Markham is at his home, he's quarantined. And we're going to talk today about something that is going to be very important to hundreds of thousands if not millions, of individuals and businesses in the United States. And that's how bankruptcy and debtor, creditor law impacts the virus situation. And in particular, what the biggest mistakes are the people and advisors will be making in helping and trying to help clients at the present time. So Mike, thank you very much for joining us for this presentation.Mike Markham 0:51 Thanks, Alan. As you can imagine, I've already been bombarded with calls from panicked people. Whether they have a restaurant,Alan Gassman 1:03 a bar,Mike Markham 1:05 as you know Allen medical practices where all the non essential services are shut down. So all of the you know, I doctors, dentists, chiropractors, podiatrist, surgery centers, they all currently have zero revenue. But as we know they have expenses instead of the questions. I've got a look, I have no revenue. Is there a bankruptcy option for me? So I've hit them with you know, look, there's always a bankruptcy option. But the question is which one and when. If you're going a chapter 11 reorganization route. revenue is an important part of that. That's what bankruptcy plans are about. You've got to propose a plan. You've got to project your revenue and expenses. And if you think it's difficult to predict inject revenue in a normal environment for a distressed business. Think about projecting revenue in this environment where you don't even know when you're going to reopen again. So I think the biggest problem businesses have now is they don't even know when they're going to reopen. They don't know how bad it's going to be. And so with that being the case, I have to tell them, you gotta wait. You gotta wait as long as you can, because you can't file chapter 11 with no revenue unless you're prepared to put money in. And if you're prepared to put money in, gray in and we'll talk about that at some point.Alan Gassman 2:50 Today as well.Mike Markham 2:55 So if the basic bankruptcy differences chapter 11 reorganization Chapter Chapter seven is a liquidation chapter. If you're going to liquidate because your business just isn't going to make it, then you're in a rush to do that. It doesn't matter if you file bankruptcy doesn't matter when you do that. That's not a big deal. The bigger question is how are you going to survive long term if you want to survive? Long term? So let's talk about really what's probably the most important thing is okay, I want to put some money in what should I put money in for? What should I pay? What should I not pay? Right now, you're in absolute crisis mode. It's not your fault. You're in crisis mode, and I'm pretty much telling people you should only pay what you absolutely have to pay. So they go Alright, so I've got to pay my mortgage right? Now I'm like nap. I'm not sure you should pay your mortgage. What about my rent should I pay my rent? No, I'm not sure you should pay your rent, particularly on a business level personal, it might get a little different. But on a business level, I've already heard stories I've already heard from my real estate clients who have tenants like Starbucks or dentist off Aspen dental, fast food restaurants. their clients have already told him their tenants have already told him, I'm not paying you. So they've already communicated that up the line to their lenders, and their lenders are already trying to figure out so everybody knows this is coming in. Nobody expects I don't think businesses to pay rent or mortgage, no occupancy cost, which has always been one of the one of a business's greatest line items in their budget. I don't think they expect it to be paid. So then the next question is why? Well, what if I if I don't pay I mean, what's going to happen? Well, fortunately in Florida, foreclosures judicial. So it's kind of take time. We don't have a moratorium on foreclosures and evictions yet, but I think we are going to have one. And even if we don't have one, we effectively have one because the court systems are almost shut down. All hearings are being done telephonically. Nobody's appearing in person anymore. I don't know how much longer the courts are going to stay open where, where employees are actually going to be going to work every day. So it's going to be very difficult with a foreclosure. Even in a normal environment. foreclosure is usually a minimum six months before there's real pressure on you. You can file bankruptcy right up until the day before the foreclosure sale. So that's plenty of Time to at least see how this crisis pans out. On the eviction side, the window is a little bit shorter, if your landlord is pushing hard to get you out, which I don't know whether landlords are going to be doing that or not your landlord, you might have a landlord that wants you out for other reasons, you might have a landlord that just wants everybody out. I, you know, who knows? Most landlords, it's income producing property, and they want people that are going to pay, but even still, it's traditional, they have to file an eviction action, they have to serve you with it, they have to give you a minimum of five days to respond. And then once you respond, they have to have a court hearing. And so even an eviction takes a minimum of 30 to 60 days and in the current environment, might take a lot longer so evictions are certainly a little tighter and you might have to file that might be a pressure point that causes you to fall earlier. But that's a pressure point that you can deal with. When the time comes. The cash that you have is going to be precious. You're going to be out of it soon, and you're going to be thinking about coming out of your own pocket. People are asking me, what about utilities? What about that kind of stuff? What about taxes? Well, taxes, I gotta say, I don't think the government's going to be the bad guy and all this. I don't. I know that the Pinellas County tax collector just extended the payoff deadline only for a couple of weeks, which was odd to me. But the normal deadline is March 31. For real estate taxes extended to April 15. I expect to see further extensions of that, but still, you don't pay real estate taxes.They go to tax certificate, big deal. They got to attack certificate, most of those get bid out you end up paying a quarter of a percent interest, which is a heck of a lot less than the agent percent that you would owe, the tax collector of the tax collector didn't sell the certificate, then the certificate can't go to tax deed sale for two whole years. So paying real estate taxes or tangible taxes makes no sense right now. Other kinds of taxes, federal taxes, I'm never going to tell anybody not to pay them. But you got to pick your you know, you got to pick what's really, really important utilities. You know, I'd be communicating with the utility company to find out if they're really going to shut me off. For that matter if there's nobody at your office and you don't deal with a perishable items. Does it matter that you have utilities, if you've gone remote during the shutdown? So you got to think about each one of those and you got to each check. You're about the right. I think you got to think about it.Alan Gassman 8:53 So the next Mike Remy lacquer, let me just mention for you go to the next point. State law differ, we do have a lot of attendees outside of Florida. So state law will differ. But in most states, if not all states, there does have to be a foreclosure or there has to be a lease eviction. The amount of time it takes can vary. A couple of considerations and I know you take them into consideration in your white paper here is if you miss a payment, and you don't correct it, you could get booted out of your lease. If you have a under fair market value lease or a nasty landlord, when this thing clears up. Do you think there will be federal or state legislation that will allow tenants who violated their lease to stay in nevertheless? Or do you think landlords might be bullies and kick people out and take over businesses and things like that?Mike Markham 9:50 Certainly, if you default on a lease, the landlord has the right to terminate the lease if the landlord terminates. The lease and you file bankruptcy afterwards, then you don't have any lease to assume. So certainly think your landlord is hot to get you out for some reason, that is an important consideration. Flipping that over to the lender side Allen, an important consideration is alright, I don't pay my mortgage or I don't make my loan payment, and they declare a default, and then they trigger default interest. I would be wanting to know what that default interest is. Some loan documents say maximum rate allowed by law, which in a lot of states is 18 or 25%. So you can have your loan go from 5% to 25%. I just had a conversation with a client last week where thankfully, their loan documents the default rate was only four percentage points above the contract rate. So maybe when From 5% to 9%, that's not the end of the world. Right? The 25% interest to be accruing is not good and bankruptcy once they've declared the default and they're entitled to default interest under state law, that is something that under bankruptcy law would, they would also be entitled to, to your question of, will the government do something? I suspect they will, but we just don't know that right now. There's been talk of moratoriums and other things but I gotta believe that the government at some point is going to have to do something in the in the banking world and they're gonna and there's going to be some bartering going on. And part of that is going to be not, you know, bullying your borrowers or bullying your tenants.Alan Gassman 11:54 So another quick question. I know there's something in the bankruptcy code about filing bankruptcy, and the whole Having responsibility for up to one year in a long term lease. So how would that work? If I have a 10 year lease and I don't think my business is going to survive, I personally guaranteed that lease is there a get out of jail free card and the bankruptcy code and allows me to file bankruptcy and limit my exposure to one year?Mike Markham 12:21 Well, the bankruptcy code has a special provision that if a lease is rejected, leases must be either assumed or rejected. If the lease is assumed, then all the defaults have to be cured. The courts I think, are going to be a lot more liberal about the length of that cure period on an assumption, generally, and historically, that's been called six to 12 months, you might see courts give much longer cure periods, because if you missed six months or rent, they only give you six months to cure. That means you're making double rent, right in most businesses. Can't afford double rent. If you reject, that means you've got to surrender the premises. And then that triggers the provision that essentially caps the claim at one year's rent. So that at least caps that claim. And you see that used a lot in retail bankruptcy cases. When you have the big retail bankruptcies. That's the primary reason that they're filing and you see him reject leases almost on day one of the case. But interestingly, that if the individual guarantor files bankruptcy, that one year cap, at least in Florida, least under the controlling law in Florida bankruptcy cases, is that the one year cap also applies to a guarantor that files bankruptcy. However, the one year cap does not apply to a guarantor that's not in bankruptcy. So if the business craters, the lease is really rejected while the bankruptcy claim is capped at one year, that non bankrupt guarantor is going to get sued for the total damages under state law.Alan Gassman 14:13 So the not so that guarantor would also have to go into bankruptcy and would have some sort of plan approved that would limit the liability to a year.Mike Markham 14:22 Yeah, if they went into a reorganization type bankruptcy there a chapter 11 or chapter 13. Then then yeah, they would, they would have to that would that claim would be capped out at one year, if the person was able to file a Chapter Seven liquidation bankruptcy, kind of doesn't matter how big the claim is, because that that pretty much means that there aren't a lot of assets in the bankruptcy in the first place.Alan Gassman 14:49 Okay, Thanks, Mike. And before we go on, I should have said in the beginning of this presentation, don't try this at home. If you don't, if you're not an experienced bankruptcy lawyer. I don't care How many books you've read and how many conferences you've gone to. You need somebody like Mike Markham to help you guide these clients. It's fine to get all the clients information to tell the client what you know to tell the client your opinion. But if you're doing this without an experienced Bankruptcy Lawyer assisting you, you are treading on very dangerous waters. So Mike, what, what is our next topic here?Mike Markham 15:24 I think the next topic Allen is putting money in I've already gotten these calls this week and people like, Look, I'm running out of money, or I'm out of money, I want to pay my employees. I want to make payroll because they want to, they want to do what's right by their employees. Maybe they have a couple of critical vendors that they want to take care of. For whatever reason they've decided they're going to put money in. You're going to put money in in this environment you need to put it in, you need to properly document it, and you need to properly secure it. Meaning you need a written note Written security agreement, and you need to file a UCC financing statement to properly perfect the lien against the company's assets. So that later on down the road, if you end up in either a liquidation mode or a chapter 11 reorganization mode, that you're the first person to get your money back out. Otherwise, if you put the money in, and you don't contemporaneously secure it then you're if you pay yourself back, that's gonna be what's generally called an insider preference. And it has a one year look back. So if you if you put $100,000 in this month, and three months from now, you pay yourself that hundred thousand back. And God forbid, six months later, the business fails anyway, because it just couldn't survive. Then you're at risk of getting sued for the hundred thousand that you took back out. If you put it in and it's secured, and you take it back out as the secured lender, you do not have that preference exposure.Alan Gassman 17:13 So,Mike Markham 17:14 on that point on the next question I got asked was, what about the 300,000? I already put in last year Can I secure that? Because they just now heard oh my gosh, I should have secured that. You have a similar problem. If you put in money last year, and you now secure it, then that lien that you're taking on the company's assets, that can be a trip preferential transfer. So if you secure a lien now that lien is going to be avoidable as an insider preference for a one year period of time, so let's secure a lane on pre existing debt now. you file bankruptcy within a year you're going to use you're going to lose that lien. So just understand that that's not necessarily going to work. I think if you're going to be putting money in now contemporaneously, I would limit my lien to that new contemporaneous money, so that I didn't look like an overreaching, you know, business owner that was trying to gain an advantage, you know, on my creditors.Alan Gassman 18:28 Mike, a lot of professionals are advised to take a salary of about 280,000 a year and to take the rest in dividends and they take it every month, and that's to keep employment taxes down. I would think that right now, you would continue to take your regular salary, but not take any dividends, because dividends would also be considered a preferential transfer that would be set aside within a year correct?Mike Markham 18:56 Yeah, well, dividends would probably get set aside as fraudulent. transfers meaning, you know, distributions from an insolvent entity can certainly there's nothing wrong with you taking your regular salary right now that's perfectly normal. But you shouldn't be looking at taking distributions out. And if you're lucky enough to be in a business that that lets you do that, you're probably not worried about filing bankruptcy anyway.Alan Gassman 19:29 So under the preferential transfer rules, if I'm owed 20,000, in back then because I didn't get paid in February, and I now take, and I, and I'm owed 20,000, this month for my work this month, and I take 20,000 if I'm taking it for the February work, then the one year rule applies, but if I'm taking it for the march work, then there then then that satisfied rule does not apply. How do you record keep How do you designate How do you make sure that this contemporaneous payment for value will hold up?Mike Markham 20:07 Well, you just need to document it as best you can, you know, if you're going to make a paycheck, make it for the current pay period, don't make it for the past pay period, on payroll, and it's a little bit different analysis in an ordinary debt, because employees do have a priority claim in bankruptcy up to approximately 13,000. So if you were taking 13,000, only on past as long as it was within 90 days, then that would be priority and it probably wouldn't be preferential to taking more than that, that it would but if you only have the 120 thousand that you can pay, pay that 20,000 for the current pay period, documented as such, and leave the old 20,000 on the books, you know, as as a debt, you know, loan debt to shareholder whatever whatever however you would call it in your books.Alan Gassman 21:01 Okay, very good.Mike Markham 21:06 So let's talk a bit about some changes to the bankruptcy code. And then some even more changes that just happened with the coronavirus bill. Very recently, the bankruptcy code was modified to include a special small business chapter or at least a very modified small business chapter. And within chapter 11 in that new small business chapter, it applied to small businesses, meaning businesses whose debts do not exceed about 2.7 million. And then, the advantages of that small business subchapter, as they call it were that it moves faster. The unsecured creditors don't vote on a plane So you don't have to solicit balance and acceptances of your plan to unsecured creditors. And you don't have to file reports and pay fees to the office of the United States trustee. Instead, what they do if they're appointing this, this sub chapter five trustee, who's really kind of a mediator of sorts that gets involved in your case, and helps you mediate with your creditors and get your plan pushed through, and it's supposed to happen very quickly. It's supposed to be about a 60 day 60 to 90 day process. So that had just gone on the books. And frankly, I haven't even seen it's been on the book. So few weeks. I haven't even seen how it's worked in practice. And so then I learned that in the disaster bill that was just passed last week, that they part of what they did was they raised the $2.7 million cap To 7.5 million. So you could have total debt of, you know, $7 million, which is a significant amount of debt for a small business. And you're still eligible for that more fast tracked less invasive, you know, small business chapter. So I suspect that these caps only been changed for one year, because they're expecting this to be over within a year. I wouldn't be surprised if they extend that because they're going to see how great it worked, but we'll see when we get there. But you know, it's always been very difficult to take a client that has three or 4 million in debt and run them through a normal chapter 11 process because chapter 11 is, there's a lot of paper very time consuming, very expensive. And this Subchapter S thing was, or sub chapter five is what they call it within chapter 11. was supposed to cut down on that expanse and Make this a little easier on those smaller businesses. So we'll see what happens. But I think you're gonna see a lot of those. And oh, by the way, that small business chapter applies to individuals as well as businesses. So you could have an individual with up to $7.5 million in debt that's now eligible for what is, in essence, a super, you know, Chapter 13, where the plan payments are really driven by the person's net disposable income, so and creditors don't get to bet. So, Alan, we've talked about this before, but in individual chapter elevens. The problem in the past and always been that if you didn't get the vote of your unsecured creditors, you were kind of at at the end of the road because of what's called the absolute priority rule. Now, under this small business chapter, since your creditors don't vote, all the courts can to do is look at your projections of revenue and expenses. And as long as you're paying your net disposable income to your creditors mean that might be one or 2% on the dollar. I mean, think about it if you have $7 million in unsecured debt, even if you had $100,000 of net disposable income per year, for five years, that's 500,000 on 7 million, that's a small fraction. So this is going to give some individuals you know, a real opportunity to maybe clear out some stuff.Alan Gassman 25:39 Now, what about the secured creditors? They'll still be able to vote, and we'll have to approve a plan.Mike Markham 25:45 Yeah, you'll still have to work through with your secured creditors. But again, you know, if you have a secured creditor or the only issue with a secured creditor is the value of their collateral, right? When we look at looking at the opportunity that's going to bring you now There's no question that three months, six months from now, and I'm purely estimating, right based on the length of this crisis, but right now collateral values, whether that's real estate, equipment, inventory receivables, what's happening, the values dropping rapidly. You know, your receivables, you could have a million dollars of receivables on the books, well, nobody's going to pay them. And you're gonna wake up six months from now and everything's going to be 180 Plus, how do you value 180 plus receivable, generally 10% 20% Max, so what's happening is the value of secured credit or collateral is dropping. So that means you're gonna you know, that's generally what you have to pay them, the value of their collateral is what they get, you know, stripped down to to the valuation process. So, you're gonna see a lot of collateral Maybe it gets devalued over this next six to nine months. But it ends up being actually worth more than at the moment you value it. The general rule is that you value collateral for purposes of bankruptcy on the petition date, and you don't consider increases in value during the case. So if you file, I always tell people, you know, you know, there's a trough, right, it comes down, and then you go back up. Now, I always tell them, wait till you get to the bottom and the second, you see that first little uptick, that's when you file because then you know, you're going to have income, that you can make payments with that that's also going to be the low point in the valuation of collateral.Alan Gassman 27:51 Wow, very interesting. So even if the secured creditor is not cooperative, as long as the plan provides for the secured creditor to get Their value back based upon the date of the value of the collateral on the date of filing, then the judge will approve a reasonable plan.Mike Markham 28:10 That's generally the rule. I mean, obviously, there's a Yeah, there's a devil in the details, as they say on that stuff. But I've got to believe bankruptcy judges tend to be pretty debtor friendly. And I think this crisis is going to make them even more so. Because this crisis is nobody's fault. It just happened. So no different than when you see I can tell you, I can't I couldn't count the number of times I heard a few years ago. Well, the business is really impacted by Hurricane Irma. You know, any kind of disaster. Bankruptcy judges tend to give the benefit of the doubt to the debtor, and debtors tend to get treated probably more fairly. From their perspective, certainly then creditors feel like they're getting treated.Alan Gassman 29:07 So wasn't that good? Yeah. We'll see how much the bankruptcy world gets.Super. What do you have next for us?Mike Markham 29:19 Well, I haven't done a very good job of scanning down through the, through the white paper, as you mentioned it but a couple of things. You know, a lot of people are wondering, you know, look, is there anything I can do, especially the doctors with businesses, you know, like they they're an eye doctor. All they do is cataract and LASIK and they do a ton of it. And we have these clients, you know, tie volume, big money, private pay, or private insurance pay, or even Medicare on cataract by return mail, in their out of business. The government has said no You know, your non essential, you've got to shut down. And I had a client asked me, so is there any will bankruptcy help me get around that? Unfortunately no. Bankruptcy is not going to undo any any of that stuff. What's going on right now is the exercise of police powers and police powers are generally accepted from the bankruptcy code. And bankruptcy courts can't do anything to impact, you know, a state or federal government's police power. So you can't file bankruptcy next week and get yourself operating again, out from under a state or local moratorium. It's on the books, you're just gonna have to wait it out. But, you know, I got to believe that as soon as it's possible to let those things reopen. They're gonna reopen them depending on you know, the situation So what have I been telling people to do? I mean, a lot of people they call, they're panicked. They don't know what to do. I kind of give them the same speech that I give my panicked clients every time. This is like an eighth grade math test. If you sit down in your eighth grade math test, and you read the first question, and it really stumped you, and you panic, I can tell you what grade you're gonna get, you're gonna get an F, because you've lost focus. You don't know, you know, oh, my God, I can't figure this out. I can't You can't get that way. You've got to, this is the time where you've got to get even better at managing your own emotions in your own mind, and you've got to skip that question. You've got to roll your sleeves up. You've got to go to question number two, and you've got it like, Alright, okay, I got question number two. I got the answer for that. Write that stuff down. In really, this is a time to build new discipline, new focus, and not to panic because if you do, you know, I can tell you the outcome and so, like, I got nothing going on, I got nothing, I can't buy anything, I can't sell anything. I don't have any employees. I said, Look, start thinking about your business as a whole start self analyzing your business look back. Was this was this a part of my business that was really profitable. Because now's the time to do a full reset, right? You can do a full reset on your business. Let's say you had four business divisions that you know four things you made money on. And one of them you didn't really make money on. Now's the time to cut it loose. You know, now it makes perfectly good sense. You know, I just I'm going to cut that part of the business loose. And and you know, blame it on coronavirus, whatever. But now's your time to reset. Start over maybe you start with an even more powerful profitable business and start thinking about, you know, what's my most profitable business? who I met who are my most valued employees? You know, start cutting stuff because now's the time where you have to do it. And you figure out, you know, when you have a business that's 510 1520 years old, it's no different than your house. Now you start opening closets and going, why do I have all of this stuff? Treat your business the same way? start clearing out, clear out what you can get yourself reorganized, reset the button and start thinking about the minute this thing opens. How am I going to make $1? How am I going to do my best on the day it opens. And if you're ready, when it hits, you'll be ready when it hits. If they reopen tomorrow, they're not going to do that. But at some day, they're going to reopen. You need to be the guy that that jumps out of the starting blocks the fastest and grabs that market share back Nobody's had for all those months. So that's what I would tell you, if you're in that panic.Alan Gassman 34:09 And as we've seen Mike from, you know, years and hours and hours of conference time when you meet with a client, if you listen to them and you help them hear themselves, it allows them to have a sounding board with their CPA with their lawyer with their friend with their banker, and with a good bankruptcy lawyer. A lot of decisions can be made in the conference room that will be much better than the decisions that people have made on their own without getting help. Part of that is the psychological process that we go through. We shut down or gears on the tracks. We think we know all our alternatives, but we really haven't checked all the alternatives. And one thing I really liked about your white paper, Mike, I think at least three or four different times. You said number one is your health. Number two is the health of your family. Point number three is your business. Because if you as you've also said many times to clients, when the oxygen masks come down on the airplane, put yours on first, because you can't save everybody else until you're secure. You can't have a business that employs 20 people. If you keep all 20 people on the payroll and there's no money left, when it's time to reopen, you're better off with two employees and 18 that'll hopefully come back, right.Mike Markham 35:27 That's right out and in a lot of a lot of business owners or there'll be thinking right now, you know, they have 120 thousand dollar check, they can write or they have X dollars in the bank account, they've got to use it for something and they're struggling with should I pay myself or should I pay these other people and again, like the mass that's fallen, you know, I tell people all the time also, don't violate rule number one. Rule number one is to look out for yourself, because there's nobody else looking out for you. If you look out for yourself, You keep that business open and operating, then those people will get their jobs back and there'll be long term jobs, they won't just be one more paycheck. We're not talking about one more paycheck. None of this is about one more paycheck. We're going to get through this, we're going to wake up one day, we're going to be through it. And we're going to be talking about, oh my god, that was terrible. You know, we're going to be talking about this for the rest of our lives. You know, the pandemic of 2020, the corona virus, whatever we call it, we're going to be talking about it. But hopefully people then are going to use this as a way to to be better for the next time. But yeah, you got to look out for yourself. In every dollar every check you write. You've got to ask yourself, Is this going in the right direction is this a check I need to write particularly now when we don't really know the end. You know, the end of the of the crisis. That's the part that makes this The most complicated thing to deal with and on that point now, here's something both at the business level and at the personal level that I would encourage people to do sit down and make a budget. And people go, Oh, yeah, I do that all the time I get will show it to me. Well, no, no, I do it. I have a budget. I'm telling you I have a budget. No, no. I mean, is it on paper? Is it on a piece of paper? Is it in a spreadsheet? Is it written down? I don't care if it's online paper from elementary school, I don't care but I'm telling you that the average person, go to the business, why have a p&l? Okay, let me let me get you my p&l. I hate to tell you, but those p&l that come out of that QuickBooks, they're worthless to me as a as a bankruptcy lawyer. That's a cash manager. I'm in cash management mode. I know there's X dollars coming in. I need to make sure there's not x plus one going out. So sit down, business level, personal level, make a budget. Look back at your checkbook. Look at every single check you wrote in, don't forget about the quarterly and the semiannual and the annual payments you make. Don't forget about, you know, oh, I only pay my real estate taxes once a year, we'll divide that by 12. Don't forget that you only pay your car insurance twice a year, we'll divide that by six, put it on the budget. You'd be surprised how many people are running at a negative and don't even know it. And so I would challenge everyone use this time, get that budget down, figure out that you're paying $211 a month for Sirius Satellite Radio, figure out that you pay in $284 for cable and internet. Figure out these little things that you're paying for and ask yourself, you know, now's the time to pare that stuff down, get lean and mean change. This is like going on a diet. You know you need to make permanent changes. You know, you the diets the opposite, you take in more calories than you burn, you gain weight, you take in less calories and you burn, you lose weight. The budgets the same way. If you spend more than you make, you're getting deeper in the hole. And people don't even know they're doing that. Spend time on the business level. If you sell something in a manufacturing or even an assembled good type I I'm always surprised the clients don't know their cost of goods sold. And they're doing Alan what we call in the business making it up on volume. They're losing 48 cents a unit. And they're happy that they sold 600,000 units last month, times 48 cents. They don't even realize they're losing money. They're excited about those sales. If you're selling something you're losing money on. You're not making money, you're losing money. So now's the time to get out that pencil and sharpen it and figure out some of those details that you just don't have Time to focus on, you know, when you're so busy because you're running your business.Alan Gassman 40:08 Let me also mention Mike, you and I have seen time and time again where people took the money from their IRAs, which would have been creditor proof, they paid tax on it, which Congress just said, you can do that to the extent of $100,000. They pulled on their home line of credit, losing the ability to protect their homestead. And they've done these things while keeping their boat and their vacation home. Because the boat went down in value, that vacation home went down in value, and they're waiting for them to come back up before they unload them. Sell the boat as soon as you can sell the vacation home as soon as you can, before you or leverage them before you have to touch your home equity loan. If you're a Floridian or your IRA, these are your safe assets you're going to need them to restart.Mike Markham 40:58 Yep, no question Alan. If somebody came to me right now and said, should I take out a mortgage on my house to keep my business afloat? I would probably say the business that currently is closed that business. And I'd be sarcastic because I'd want to get their attention and I'd want them to think about it. But I will tell you that until I know the end of the story, until I can see light at the end of the tunnel. Right now, there's no light at the end of this tunnel. I don't know if it's April, May, June, July, August or September, I just, I don't know. So now if I could now if I'm toward if I see light, and I know that if I go get 200 grand, I can solve my problems, and I can be ready to go in 2021 a whole different issue. Maybe then I could get more comfortable. But right now the idea of leveraging or liquidating exempt assets like homestead retire Assets cash value of life insurance and I'm talking Florida exemptions obviously out not, not national or federal. Again, I would I would not leverage or liquidate any of that stuff right now because I don't know the end. But you're right, I would be not the first payment I wouldn't make as the boat payment, the next payments on the vacation home. You know, the next is on all my toys. You can always get toys back. You know, when you're doing good again, let that stuff go. That's the last thing. So this is an opportunity for, you know, decluttering but yeah, do not I would not be thinking about leveraging exempt assets right now. I think that's very short sighted.Alan Gassman 42:52 Absolutely.Okay, anything else? That was a really, really good white paper. Very good. presentation.Mike Markham 43:02 No, I don't think so. And I think we're in for a pretty long haul here. And I think that's what's important is for people, unfortunately right now you're just living day by day, week by week. Until you until, you know, there's some indication that we're heading back to normalcy. But I think when we get back there, I think there's going to be a lot of pent up demand. And I think people are people that are ready to move forward with their businessesare going to be in a great position.Alan Gassman 43:34 There was one more thing in your white paper, which basically was you need to have at least $25,000 set aside to pay for a chapter 11 bankruptcy. I know based on size and complexity, it can be multiple times that but that would be your last powder. So you really have to talk to somebody like Mike see how much to put aside to pay for a bankruptcy. Make that you know, eat fam instead of steak and chicken to the extent you need to to make sure that you can pay for bankruptcy representation when you need it. We know from experience that that makes the difference between survival and thriving, or closing it down and getting the job.Mike Markham 44:19 And Yep, and thanks, Alan for that. And obviously those numbers can change depending on circumstances. But also, you're sitting there right now thinking, you know, my client doesn't need to talk to a bankruptcy lawyer or I don't, you know, or I don't need to talk about the lawyer. You know, you need to be thinking about what am I going to need to be talking to one and two months or three months or four months, because if that's out there, you should go ahead and talk to that person. Right make that there are things that you could be doing now. You know, that makes more sense than waiting the waiting particularly waiting to the last minute and I tell you my world, people usually get to me much later than they needed to get to me. So it never can hurt to have that consultation. One or two hours, go through some basic questions, get some basic understanding, and then know, alright, if this happens, that's when I know I really need to engage this person proactively to try to stop whatever bad thing is about to happen.Alan Gassman 45:30 Beautiful. Okay, Mike, thank you very much. We'll be calling on you. Again, thanks for everything you've done for our law firm and for our clients over the years. Unfortunately, I think there's going to be a lot more of that in the next three to five years. This thing is just going to be unfolding unfolding for a long time.Mike Markham 45:49 Well, thanks for having me out. And I look forward to doing it again sometime.Alan Gassman 45:54 All right, stay healthy. And thanks to all the listeners and viewers today. May the rest of your time be available.Transcribed by ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download