As a bankruptcy lawyer, Stuart Gold is on the ugly front lines of the decline in coronavirus. But he is well prepared: he has been in the field for more than three decades. Since 1987, he has been an American bankruptcy trustee, and he is a co-founder and managing partner of Gold Lange & Majoros, based in Southfield, Mich.
Thanks to government assistance programs, bankruptcies have not begun to increase yet, but Gold says he expects a "tsunami" of cases. He has some important messages for small business owners who may be in an unexpected financial bind, from new programs to take advantage of the best way to think about bankruptcy. ("Mistake" is not.)
Gold recently spoke with Fortune for a new series, The Coronavirus Economy, about his work, how it has changed during lockdown, and what he sees coming.
This interview is easily edited and condensed for clarity.
Fortune: What does your workday look like during normal times?
Gold: I've been an American bankruptcy trustee since 1987. When a person or company applies for bankruptcy under Chapter 7, we investigate the debtor and determine if there are any assets that the debtor has that we can sell and distribute to creditors.
About 50% of my practice is devoted to trustee work. I handled about 70 hearings this morning, and I do this twice a month for my trustee site. And there is preparation for that, you have to go through the debtor's documentation to see if there are any assets that should go to creditors. Basically, I am an advocate for the creditors.
The other half of my practice is devoted to representing individual debtors who file for bankruptcy, as well as working with businesses to register under Chapter 11, or handling their resolution of bankruptcy.
How has coronavirus changed your day to day work?
Well, usually my trustee hearings are personal. It is me, a debtor, and the debtor's advice and any creditors, in a room to review their financial circumstances. And in the same room are [people waiting for] other issues to be heard.
But now we make them strictly on the phone. We have conference lines for debtors and debtors' advice to call in, and notice to creditors that they can be on the line at the same time. We have been doing this since March, and we were just told that it will continue at least until August.
It is painful to be in a conference call with 50 people and one person does not mute their phone. But lawyers are getting used to it, advising their clients, "Hey, make sure your phone is muted."
I have spoken to clients and conducted the initial consultation over the phone, and we secure documents remotely. We have to go through documents, and I did that through Zoom – to the extent that clients have the ability and the equipment. Some do, and others do not.
What attitudes d o people bring about bankruptcy?
I would say that the majority of clients think there is failure. There are many tears as they come in. And we do our best to assure them that bankruptcy has been around for centuries. It is embedded in our constitution. In a capitalist society, bankruptcy is necessary to give people a fresh start, and to let entrepreneurs try new things and give them a safety net. We want people to take chances.
They think they are a failure, and we try to rebuild them and let them know that they are just one of many who seek this kind of relief. And that's there for a reason.
Many people are in trouble out there, including many people who probably never thought bankruptcy would be something they needed. Who should consider bankruptcy?
It's important to speak to a professional and be informed about all your options – both bankruptcy and non-bankruptcy. People are aware of the stigma, and they should know how it plays out, for example in the credit rating. And they are afraid of losing everything; they are not aware of exceptions that may protect their assets. So a review of the situation is important.
For the business side of things, it is important to realize that there are other options than just shutting down the business and going away, such as the restructuring available under the new subchapter 5. It's important message: It's just not a size that fits everyone. There are solutions to financial problems. I have been doing bankruptcy workouts where we only work with creditors. Every case is different and it is important that you get all the information.
The financial damage from the coronavirus is expected to be significant. Does that mean more work for you?
It's been the opposite of what you expect: submissions are far down, almost 50%. The relief packages provided by Congress have allowed people to survive and do not need bankruptcy assistance at this time.
However, these benefits will be lost. Bankruptcy filings are expected to increase dramatically in the third and fourth quarters of this year. Some referred to what comes as a tsunami, where the water recedes from the coast, and then it comes in at once and floods the lowlands. It's coming – not just for individual consumers, but for businesses.
Are you preparing for it by adding employees?
Absolutely. At the height of the Great Recession, the company had 30 employees and we are under half of that right now. We expect that we will be scrapping and hiring in the third and fourth quarters, due to the reliance on submissions.
Subchapter 5, sometimes referred to as "Fast Pass", is a new type of bankruptcy specifically for small businesses. What is the advantage?
Congress passed it last fall, which has proved very timely. The total cost will be significantly reduced. And it's very fast; You can be in and out basically four months. And the approval process for the plan is more guilt-friendly than traditional Chapter 11.
When it rolled out, it was for businesses with debt below $ 2.7 million. Now they have [expanded] owed less than $ 7.5 million. These businesses can benefit from this streamlined approach.
You have had your career interacting with people on what could be some of the worst days of their lives. How do you approach it, when it comes to your nightly way ?
People come in with many financial and emotional burdens and lose businesses they have maintained for a number of years. We try to see if there are alternatives. If it is a viable business, we can consider a reorganization.
I am dealing with individual debtors in my trustee conversations who are very scared. Bankruptcy can free you of debt, but it does not put food on the table if you do not have a check coming in.
These people undergo a lot of suffering – financial suffering, emotional suffering. So empathy covers my entire practice.
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