Doctors Being Driven Into Bankruptcy

Bankruptcy Affects Doctors and Other Professionals

According to CNNMoney.com, a disturbing trend over the last few years has been the increasing number of physicians and medical professionals filing for bankruptcy protection. Though many of these bankruptcies are simply Chapter 11 reorganizations, for some bankruptcy sounds the death knell of their practices and careers.

The Causes of Bankruptcy among Doctors

Studies show that the recession, which has been deeper and longer than expected, has taken its toll on medical practitioners, particularly those who specialize in nonessential procedures. With fewer dollars to spend, many consumers are unwilling to part with even the low cost of a copay for an office visit. In addition, the proliferation of urgent care facilities has resulted in “bargain shopping” by people seeking medical treatment. Furthermore, as more and more companies cut back on the health insurance benefits they provide their employees, more employees are reluctant to spend their own dollars on medical care, and either don’t seek care or go to an emergency room at a hospital, where they may be treated without providing insurance coverage or payment.

Doctors also blame shrinking insurance reimbursements, changing regulations, increases in the cost of malpractice insurance and other business necessities. Especially hard hit have been chemotherapy providers, who have experienced dramatic declines in drug and medical supply reimbursements from patients’ insurance carriers. Also heavily impacted are doctors or medical professionals who work in areas where Medicare is prevalent or where many patients either have little or no insurance. In these areas, patients are unable to afford payments that insurance companies no longer make.

Doctors often have large amounts of debt to match their income. In our experience, doctors as a group present more complications than the typical debtor. Careful planning, having the advice and experience of the right attorney is essential to success. But as with so much else, with the right approach and attention to detail, the patient’s prognosis can be excellent!

Contact Neuner & Ventura, LLP

Let us help you take back control of your life! We understand the stress, anxiety and confusion that can be associated with a potential bankruptcy filing. We offer a free initial consultation to every new potential bankruptcy client. (We do, however, reserve the right to charge a fee to review any work done by another attorney). For an appointment, call Neuner & Ventura at (856) 596-2828 or send us an e-mail. Evening and weekend appointments are available upon request

Representing Clients across South Jersey

Revel CEO resigns weeks before expected bankruptcy filing

Recent news of Revel Atlantic City CEO Kevin DeSanctis’s resignation has brought even more attention to the failing company and its imminent bankruptcy. The $2.4 billion resort is filing for Chapter 11 bankruptcy in order to save the company and wipe clean some of the debt that has been piling on. Unfortunately, the young casino has had difficulty bringing in gambling revenue in Atlantic City and has been unable to fulfill the high expectations of the casino market. Full article.

This bankruptcy filing shows that businesses large and small can run into trouble from bad luck, poor planning, or market conditions. See my article on ways businesses can avoid bankruptcy. However, when a business is in trouble, the biggest mistake owners make is not forming a workout or exit strategy early enough. As with so much else in life, timing is everything. So often, I see businesses that could have been saved had someone sat down to do some serious planning, including consideration of a bankruptcy, orderly liquidation or workout, much sooner.

For businesses, the options include an orderly liquidation, secured creditor workout, chapter 7 bankruptcy, or a chapter 11 reorganization. Each of these have risks and costs, as well as benefits. Careful planning including a detailed look at cashflow and opportunities to reduce expenses or strategically increase revenue is critical. Just as importantly, businesses need to have a multi-prong series of exit strategies. Not planning is a recipe for disaster. All this needs the advice of an experienced business bankruptcy specialist.

We have seen that many business owners delay considering these matters because they fear the personal consequences of a business bankruptcy or shut down. These can include loss of income from the business, loss of an enterprise they have put their heart and soul into, or personal liability. Many have given mortgages on their homes or have personal liability for bank debt and possibly payroll or sales taxes. But ignorance is not bliss. Things do not get better by ignoring them.

Careful planning requires that the individual owners know the options they face personally. At some point, in order to preserve the confidentiality of their discussions, it may be advisable that the individual owners have their own attorney separate from the corporate or business attorney. Options to be explored are workout strategies as well as bankruptcy. Here, the right advice is essential so that the owners can minimize or avoid future problems. The traps are many and easy to fall into.

For both businesses and their owners, being in financial trouble is scary and overwhelming. Hiring the right attorney to help you to plan and guide you through the options and choices is essential. The right attorney can help business owners take back control. There is no substitute for experience. Advice and representation from qualified legal counsel is the best money that can be spent.

Neuner & Ventura are experienced attorneys federally recognized as a debt relief agency helping people obtain debt relief using bankruptcy and other means. As a long-time business bankruptcy specialist, Steven R. Neuner has the background needed. Please contact Neuner & Ventura at (856) 596-2828 for a consultation.

Not your usual dull bankruptcy case…!!

A bankruptcy trustee colleague of mine related the following story about a recent case where he was the trustee for an “interesting” debtor in bankruptcy:

After hearing the case about a year ago and doing his usual investigation, he filed a final “no asset” report that there was nothing for creditors. He said it “sure looked like” a “No Asset” case to him. Then he got a call from “every Trustee’s best friend, the ex-wife.” It turns out our intrepid debtor had gotten the house in their divorce, had moved in, but had never transferred title into his name.  This gentleman “must have thought listing his interest on his bankruptcy schedules wasn’t important.” He  then tries to sell the house,  but the title officer, seeing the bankruptcy, calls the trustee about it. The trustee sells the house, using the money to pay creditors including the IRS. He also refers the debtor to the United States Trustee for possible investigation of bankruptcy fraud.

But that’s not the end of the story. My trustee friend found out a few months ago that this debtor also had an undisclosed  malpractice claim against a chiropractor and the case is going to trial in the spring.  Even more recently, he learned that someone set off a massive amount of explosives on property owned by local  dentist. There was damage to surrounding homes: busted windows, one house reportedly knocked off its foundation, blackened trees and a 10 foot diameter blast crater. The rumor was that it was this same debtor who set off the explosion, using an old C4 explosive and that this gentleman  may have a license to handle explosives, “which is itself a frightening thought.” Sure enough, the individual in question has been arrested.

Just another day in the life of a trustee… those of us who have been there know how challenging the job of a trustee can be. But the other point for the rest of us is that those who commit fraud have to remember that there is always someone, usually an “ex” someone, who knows the truth and wants to tell it.

Getting a business loan requires planning

A recent article in the New York Times underscores that getting business loans requires thought and planning. http://boss.blogs.nytimes.com/2012/08/16/when-looking-for-a-loan-you-cant-fight-gravity/. More times than I can count, business people have come to me because they put their homes and future income up to obtain a loan for a business that later began failing. Sometimes the loans are used to pay the owners salaries, so that they are in effect borrowing to pay themselves!

Before getting any loan for a business, the owners need to have a plan how the loan is going to be paid back. If the loan is being used to keep the doors open instead of expanding or investing in making the business better, this is a big red flag.

One banker recently confided to me that banks are competing to sign up customers, but the customers they are chasing are the cream of the crop. Otherwise they are not interested. To get the best terms, you the business owner need to make your business model attractive. This requires  well-thought-out planning supported by realistic projections and solid data.

In these tough times, the businesses that survive will be the ones that thrive. Make yours one of the success stories.

For more about avoiding or dealing with business problems, take a look at our website and blog.

Credit is a two-edged sword: Businesses, like people, have to be careful how they use it

This article in the August 2, 2012 New York Times, http://www.nytimes.com/2012/08/02/business/smallbusiness/for-small-businesses-bank-loan-alternatives.html?_r=1 details how businesses can borrow money from more expensive sources than bank loans, but at much higher cost. It is informative, but it should remind us all that credit is a two-edget sword. Used properly and with proper planning it can help us thrive but used carelessly it can destroy hard earned success and impose a blight on the future.

Too often we have seen business people who used debt, including factoring or asset based lending (described in this article) to paper over more serious problems. If a business wants or needs to borrow, the first questions have to be “why do we need this?” and “how are we going to pay it back?” If borrowing is used to invest in improvements to business operations, or to expand into a profitable new area, it can be the germinator of future success. But if new debt is being used to pay the owners or carry the business, caution is necessary. Too often we have seen businesses that “kicked the can down the road” by borrowing in this way. Sooner or later the day of reckoning comes.

As with anyone using credit, thought and planning is critical. Business owners need to carefully evaluate present and future cashflow. Evaluate how the new money is going to be used, and balance the benefit against the cost. If a business is losing money, borrowing to make up the loss will simply accelerate the losses. Consideration should be given to reducing expenses before borrowing more.

And throughout this process, the best money a business owner may spend is for accounting or legal advice from professionals experienced in business and turnaround issues. No matter the situation, it always helps to understand all the issues and alternatives, including use of Chapter 11 bankruptcy, or bankruptcy alternatives such as business workouts or assignments for the benefit of creidtors.

How small family owned businesses succeed, and how to avoid feeding a failing enterprise

Here is a great little article from the New York Times explaining what attributes are common to small family owned businesses. Recommended reading.

http://www.nytimes.com/2012/04/05/business/smallbusiness/how-they-beat-the-odds-to-keep-family-businesses-healthy.html?_r=1

In our experience the watchword for business owners is “fail to plan, plan to fail”. These businesses do the following:

1. They stay on top of their game, and stay flexible, ready to find and meet the needs of their customers and of the marketplace.

2. They make everyone pull his/her weight, and avoid favoritism to family members. I would add that business owners who develop a sense of entitlement to a certain income or livestyle can be the downfall of the business.

On the other hand, many business owners do not do the converse: make the business pull its weight, and if it is not then start asking hard questions.. Instead, they blindly put money into a failing business without asking the tough questions, why this is necessary. We all know some businesses are cyclical, and have to get through the lean months to make money in season. But if the good times are not enough to pay off the deficit run up during the lean times, all that happens is that the owners end up further and further in debt until they run out of money. Long before this happens the owners need to take a hard look at what is happening.

3. They seek out and get qualified advice from attorneys and accountants.  This follows from the “fail to plan…” thought above. Sometimes early advice from a trained and objective outsider can be just what is needed to get back on track.

With years of experience advising business owners, and in dealing with the aftermath of failed businesses, we know how these sad results can happen. Business owners who think they must contuinue to run a failing business need to explore the alternatives, and the ways they can avoid the vicious trap of feeding a failing business. Too often the end result is an avoidable or far-too-costly and painful business bankruptcy.

Starting over after business failure: your debts can follow you if you get it wrong

We have seen a lot of business owners whose businesses are failing and who want to start over. That is not as simple as it sounds, and doing it wrong could result in the old creditors coming after the new business and its owners.

Usually, the owners want to just start up the same business, with the same customers at the same location with the same owners. That is a recipe for problems. The problems come from two principles.

The first is successor liability. The second is that business owners operating a firm in the “zone of insolvency” have a “fiduciary duty” (or an obligation to serve as a trustee) to their creditors. A detailed discussion of these principles is beyond the scope of this article.

Starting Over After Business Failure

In New Jersey, a new business can have successor liability for the debts of the old if a court finds that a “de facto merger” occurred, or if the business is the “mere continuation” of the old. This means that the old creditors can pursue the new business for payment, providing they can convince a court that this is the case. Courts look for the following to show a defacto merger/mere continuation:

1. the new business has the same ownership, management, personnel, physical location, assets and/or general business operations as the old one;

2. the old business shuts down suddenly at about the time the new business starts up.

3. the new business or its owners assume some but not all debts of the old business, especially those ordinarily needed to continue business;

4. the new business holds itself out to the public as continuing the old business.

Any time business owners start a new business under a new name, successor liability is a risk. There are steps that can be taken to minimize the risk. Each case is different, and a detailed review by a knowledgeable and experienced bankruptcy or business attorney is needed, in advance of any such move.

The second trap is fiduciary liability of business owners. Violating this duty could expose the business owners to a later lawsuit and debts that might not be dischargeable in a personal bankruptcy. Simply put, business owners are held to a high standard of care towards their creditors when a business is failing. They have a duty to maximize the value of the business, and to not take steps which benefit themselves unfairly at the expense of creditors or which treat creditors unfairly. This does not mean that business owners are not entitled to be paid for their services, or that they have to put more of their own money into the failing business.  But lining their own pockets, or transferring assets to themselves or others without the company getting fair value in exchange; engaging in preferential treatment of certain creditors; or making false statements to creditors are some of the “no-no’s” to avoid. Again, this is not a complete list and what can or should be done is very fact sensitive and requires careful review by an experienced attorney. As always, careful planning and advice are critical

Business owners are entitled to try to start over, but without careful planning and the right advice, the result could be that the old debts beleager the new business

MF Global Trustee waives attorney client privilege and turns over emails to investigators- a cautionary tale how a bankruptcy can open a can of worms for the unwary.

In a February 14, 2012 article, “Federal Investigators Gain Access to Thousands of Internal MF Global Documents” the New York Times reports that the trustee for bankrupt MF Global has agreed to partially waive the corporation’s attorney client privilege so as to turn over  “thousands of internal e-mails and documents to federal investigators, ending a dispute over the privacy of decisions made in the days before the firm collapsed”

This reminds us that many years ago, the United States Supreme Court ruled that a corporation’s bankruptcy trustee controls the attorney client privilege and can waive it. This same rationale has been extended to corporations, Limited Liability Companies, and even partnerships. Under limited circumstances, it has been applied to individuals. As a bankruptcy trustee, I used this power more than once to pry open important information, sometimes yielding a treasure trove of information.
Normally, what a person, or the management of a business tells their attorney in private is privileged and protected against disclosure. However, by putting itself into bankruptcy, a business entity enters a “fishbowl”, and where a trustee is appointed (routine in Chapter 7 bankruptcies but far less common in Chapter 11) the Trustee becomes the new management, and gains control of the attorney client privilege. Confidential discussions between corporate officers or business partners and their attorney can potentially no longer be private if a trustee so chooses.
That is why we regularly recommend that the individual shareholders, partners or members of a business in trouble retain personal counsel. When we act as counsel for the business, we caution our clients about the potential for otherwise privileged discussions to lose that status.
Steering a business out of financial trouble is rarely simple. Litigation in bankruptcy court is always possible. Disputes with creditors are likely. Experience is essential. For more information about these and related subjects, please visit our websites at http://www.southjerseybankruptcylaw.com or http://www.nv-njlaw.com

Business bankruptcy solutions for the small business

I recently read a very interesting article in USA Today. The article’s main point is that for large businesses, a Chapter 11 bankruptcy is a useful and often successful business strategy. Think Hostess, American Airlines, and now most recently Eastman Kodak. However, for smaller businesses, bankruptcy is more difficult.

My response is that bankruptcy and other laws do exist for the benefit of all, and do work. They just work differently. Careful review and consideration of the costs and benefits is needed. For large businesses, the costs can be spread over a much larger base, and the size makes post-bankruptcy financing more attractive.

Closing a small business

If you are a small New Jersey business in financial trouble, please visit this area of our website for resources and articles and feel free to contact us at 856.596.2828.

Business Bankruptcy Solutions

Is your New Jersey business in financial trouble?

First things first — don’t despair. Even American Airlines, once the world’s largest airline, filed for Chapter 11 bankruptcy a few short weeks ago. We’re living in uncertain economic times and running a thriving business may prove daunting in times like these.

But…bankruptcy may not always be the answer. This may sound strange coming from a bankruptcy attorney but we’d much rather offer our clients the best solution to their problem. Used properly, a bankruptcy is a financial and business planning tool that can save a business from the worst consequences of past mistakes or bad luck. When properly applied, a Chapter 11 reorganization results in all creditors receiving more than they would be getting any other way. Where Chapter 11 is appropriate and successful, the business lives on to generate a valuable product or service, to continue paying taxes, and to generate profit for its owners.

It is never too early to get help planning and thinking about alternatives, even bankruptcy. We do not sell bankruptcy — We sell advice to help you make the right decision for you and your business.

 

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