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December 17, 2021 By Joanne Bella Leave a Comment

5 Ways Small Businesses Can Recoup Pandemic Losses

The COVID-19 pandemic has had huge impacts on businesses big and small. According to research conducted by Yelp, 60% of businesses have permanently closed as a result of the global pandemic, and more are still struggling to recover.

It can be hard for a business to pick itself back up after huge losses, but it’s not impossible. Here are five ways small businesses can recoup pandemic losses.

1. Review your business plan

Your business plan may have been designed to suit the conditions before the pandemic began, but we live in a different environment now. A review and revision of your business plan may be necessary.

For example, if you own a restaurant and have never had an online presence, you should consider setting aside funds for building a website that can take orders and offer delivery. This, and many other simple modifications, could ensure the continuity of your income despite the pandemic, thus helping your business recover sooner from its losses.

2. Evaluate your financial losses

Research has found that cash flow was the biggest problem for small and micro-enterprises during the pandemic. Proper cash flow management and assessment is key to mapping a recovery plan.

You can start with a detailed study of your cash flow — profit and losses — including records of all transactions, purchases, returns, inventory, rent, salaries, and so on. This will help you keep your eye on the goal to recovery, manage your finances carefully to make up for lost revenue and spend reserves wisely.

3. Hire freelance finance professionals

Many business owners might be hesitant about the cost of hiring professional accountants to help them sort out their finances. However, this is one case where the costs are worth it — and in fact, might not even be too expensive. Antenna founder Brendon Schrader notes that hiring a freelancer allows a small business to find targeted and better qualified talent to address their needs at a much lower rate.

Universities offer courses on finance and business administration online, and this has allowed more people to get the necessary training and qualifications to practice freelance accounting. With proper accounting, this will help you assess how to recover from your losses more accurately.

4. Plan your business expenses in advance

Small business owners need to plan in advance where limited funds will go next and how much can be allocated for certain business needs. Distribute a portion of the funds to go back into the business for capital expenditures, costs to restock inventory, expenses for planned maintenance, salaries, and maybe even funds toward an emergency reserve account for sustaining business operation — just in case another coronavirus variant develops. Planning expenses in advance can help you predict how soon you should be able to regain lost income, and whether full recovery is possible.

5. File for bankruptcy

Bankruptcy isn’t the only method to fix debt, but if you owe a lot of creditors, it’s often the most expedient way. As extreme as it sounds, bankruptcy offers a few benefits to belabored business owners. It can help your credit score go up, and the consolidation of debt can also be helpful. However, declaring bankruptcy and opting for consolidation isn’t a magic bullet, and can come with its own challenges. You can schedule an appointment and consult with us before opting for this route, and we’ll help you determine whether filing for bankruptcy is the best course of action for your business.

Everything in this life comes in cycles. With the worst of the pandemic behind us, it’s high time businesses started thinking about ways forward. The world has started to adapt to the new normal, and with careful work and recovery planning your business may be able to do the same.

Post solely for the use of jenleelaw.com

By Joanne Bella

This is just a basic overview and is not legal advice specific to your situation. If you have questions about your rights when it comes to debt and credit, you should speak with an attorney in your area for legal advice. If you live in California or North Dakota and would like to speak with Jen Lee Law regarding your situation, please schedule an appointment.

Filed Under: Bankruptcy, Business, Debt Consolidation

October 5, 2021 By Jen Lee Leave a Comment

And the lesson is…

And the lesson is…don’t take financial advice from a fashion magazine?

If you have followed me at all, you may notice that I tend to read a lot and like to write or do videos about the bad information I find on the internet. So, here we go.

An article titled, “6 Important Things to Consider Before Filing for Bankruptcy” sounds like it would be right up my alley. Let’s take a look.

#1 – It Affects Your Credit. 

Great. That statement is true. However, the explanation that followed got it wrong. The article states that it will affect your credit negatively and will be “significant and swift.” If you already have bad credit, filing bankruptcy makes your score go up. Read that again.

It gets worse. The article then says you are “required by future employers to know of your bankruptcy status.” First of all, that statement doesn’t even make sense. Second, it totally depends on the state you are in, the application, and the type of job you are applying for at the time. Finally, most employers prefer that you not have overwhelming debt distracting you from your job. In fact, qualifying for a job based on credit is often resolved through a bankruptcy filing because now the problem debts have been handled.

#3 (but actually #2) – Different Types of Bankruptcy.

Starts out ok. There are two main types of bankruptcy for consumers, Chapter 7 and Chapter 13. Then, it goes downhill fast. “You will need to sell off non-exempt assets, though, to pay off your debtors.” Where should I start?

First, you don’t sell off non-exempt assets. A Chapter 7 Trustee is assigned to your case when you file and they are the ones who would be responsible for selling non-exempt assets.

Second, YOU are the debtor. You are attempting to deal with your creditors. So, selling your non-exempt assets to pay your debtors makes absolutely no sense. The person who files bankruptcy is a debtor, the people and companies you owe money to are creditors.

Third, most Chapter 7 cases do not involve the sale of assets. An attorney can advise you on assets that may be at risk and often, a different chapter of bankruptcy is selected if there are assets you want to protect from sale.

#3 (the second #3 on the list) – Not All Debts Will Be Wiped Out.

True statement, but the rest is wrong. Yes, child support is not discharged in bankruptcy. However, taxes are often discharged in bankruptcy. Student loans are an interesting area because some can be discharged, but a lot cannot be at this time.

The second paragraph talks about creditors being able to challenge the debt you are discharging and that the court can rule in their favor so that the debt is not discharged. This is extremely rare and it’s usually when some sort of fraud or intentional misrepresentation is involved. This is not your average credit card debt that most people discharge in a Chapter 7.

#4 – It Isn’t a Quick Fix.

Not sure anyone thinks bankruptcy is a quick fix, but it’s often the most efficient fix. This section also talks again about losing assets. Luckily, it does say to talk to a lawyer to make the right decision, which is excellent advice.

#5 – Your Income Matters.

Hmmm. Yes, your income matters when determining if you are able to come up with a plan to pay off debt, whether that’s in bankruptcy or not. Your income matters if you are trying to qualify for Chapter 7 and have consumer debts. Your income comes into play in a Chapter 13 when we determine how much you have to pay towards debt. But the last sentence, “The more you make, the better off you will be in bankruptcy…” is wrong. Timing of the bankruptcy filing when you have lower income can help qualify for Chapter 7 or have a lower payment in Chapter 13. Talk to a lawyer, please.

#6 – There Are Other Ways.

Of course there are. But, which way is best for you and your goals? Because negotiating with 10 creditors and keeping track of 10 payment plans may be more stress than it is worth. Consolidation can also be helpful, but can also negatively affect your credit score. There are also a lot of companies out there willing to take a lot of your money to put you in a debt settlement program, which is actually worse on your credit than bankruptcy. But, no one tells you about that feature.

I promise to get off my soapbox now. Here’s the link to the article.

This is just a basic overview and is not legal advice specific to your situation. If you have questions about your rights when it comes to debt and credit, you should speak with an attorney in your area for legal advice. If you live in California or North Dakota and would like to speak with Jen Lee Law regarding your situation, please schedule an appointment.

Filed Under: Bankruptcy, Debt Consolidation

May 14, 2021 By Jen Lee Leave a Comment

Financial Wellness: The Forgotten Wellness Topic

I recently wrote an article for the Contra Costa Lawyer on attorneys and financial wellness. Much of the article applies to non-attorneys as well and are thoughts that we come across every day in our law practice.

Most people do not want to talk about their finances. No one wants to admit their finances are not their strong point or that they may need help figuring out. After all, no one else has these problems, right?

Wrong.

This idea that no one else has the same problems is why we have an elephant (Bernadebt!) as our team mascot. The elephant in the room is that way more people are struggling with financial stress than we realize. The other thing we see a lot is this worry about what others will think. Trust us, no one else is paying attention to your financial problems because they are so worried about their own and what YOU will think of theirs!

This is just a basic overview and is not legal advice specific to your situation. If you have questions about your rights when it comes to debt and credit, you should speak with an attorney in your area for legal advice. If you live in California or North Dakota and would like to speak with Jen Lee Law regarding your situation, please schedule an appointment.

Filed Under: Mindset Tagged With: debt

February 2, 2021 By Jen Lee Leave a Comment

Annual 1099-C Don’t Freak Out Reminder!

Annual 1099-C Don’t Freak Out Reminder!

Every year, we get panicked emails, phone calls, carrier pigeon messages from clients who filed for bankruptcy and then received a 1099-C in February when tax forms start coming out. Don’t panic. Here are the thoughts that are running through your head:

What’s a 1099-C?

A 1099-C is issued when a creditor cancels or forgives debt. For example, if you settle an account by paying $1,000 and the creditor cancels $5,000, then you will receive a 1099-C to pay income on the canceled debt of $5,000.

Wait, what?? I have to pay income taxes on debt that is canceled?

No, a 1099-C does not automatically mean that you owe taxes. It means that you need to determine if you are required to pay income taxes or if there is an exception that you qualify for to exclude the amount from your income. Don’t panic yet.

Ok, so what are these magical exceptions? And why are you telling me not to panic?

First, if you filed for bankruptcy, you do not owe income taxes on debt that is canceled in bankruptcy. That is one of the benefits of bankruptcy over other debt resolution options and one that should be explained to you by anyone talking about your debt options. 

Second, even if you did not file for bankruptcy, there is still the possibility that you can show that you are insolvent to exclude some or all of the canceled debt. 

There are a few other exceptions, but these are the two that mostly apply to settled accounts and bankruptcy.

Ok, I’m calm now. How do I let the IRS know that I fall into one of these exceptions?

There is a magical IRS form out called Form 982. On this form, you can let the IRS know which exception applies to your situation. There is some math involved, depending on the exception, so we recommend you speak with your tax preparer about how to fill out the form.

Bottom-line: Don’t panic. Getting a 1099-C is just a notification from a creditor that debt has been canceled. If you don’t deal with it, then it becomes a problem. However, dealing with it can save you a lot of headaches in the future. 

This is just a basic overview and is not legal advice specific to your situation. If you have questions about your rights when it comes to debt and credit, you should speak with an attorney in your area for legal advice. If you live in California or North Dakota and would like to speak with Jen Lee Law regarding your situation, please schedule an appointment.

Filed Under: Uncategorized Tagged With: Taxes

January 6, 2021 By Jen Lee Leave a Comment

A Lesson in Internet Headlines

Yesterday (January 5, 2021), news websites reported the following two headlines:

PANDEMIC SPURS MOST BANKRUPTCY FILINGS SINCE 2009
The sky is falling, the sky is falling!

BANKRUPTCY FILINGS HIT 35-YEAR LOW THANKS TO GOVERNMENT PANDEMIC AID

Wait, what? I thought the sky was falling.

How can both of these headlines be true? Because the reporters cherry-picked statistics to make the most sensational headlines. As far as business bankruptcies go, it’s true that bankruptcy filings were way up in 2020. However, consumer bankruptcy cases were way down in 2020. So, it was the best of times, it was the worst of times.

To explain, businesses struggled with shutdowns and lack of funding to pay leases, payrolls, and expenses with no revenue. Many businesses have held off filing for bankruptcy to see what a recovery may look like before jumping into bankruptcy, but many were not able to hold off, which resulted in high business filings compared to recent years.

However, consumers and individuals are currently struggling with how to predict the future. It did not make sense in 2020 for most people to file bankruptcy without knowing what debt and income looks like going forward. Also, the pandemic unemployment helped many people stay current on bills. Finally, the eviction and foreclosure moratoriums, along with court closures, have made it less urgent to file immediately to stop those proceedings.

So, take your headlines with a big grain of salt these days. It also helps to remember that you are not alone in facing difficulties. Get advice for your specific situation and use the tools that are available to you.

This is just a basic overview and is not legal advice specific to your situation. If you have questions about your rights when it comes to debt and credit, you should speak with an attorney in your area for legal advice. If you live in California or North Dakota and would like to speak with Jen Lee Law regarding your situation, please schedule an appointment.

Filed Under: Bankruptcy Process, Business, Mindset

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LEGAL ADVERTISEMENT. The information included on this website is not intended as legal advice. You should consult with a lawyer before acting on any information contained in this website.

Jen Lee Law, Inc. is a federally designated Debt Relief Agency. Jen Lee helps clients file for bankruptcy protection under the laws of the United States.

Recent Blog Posts

  • 5 Ways Small Businesses Can Recoup Pandemic Losses
  • And the lesson is…
  • Financial Wellness: The Forgotten Wellness Topic
  • Annual 1099-C Don’t Freak Out Reminder!
  • A Lesson in Internet Headlines

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