The Floodgates

Charity S. Bird on the rash of closures and Subchapter Vs during the pandemic

Published in 2021 Ohio Super Lawyers magazine

By Erik Lundegaard on December 11, 2020


When Charity S. Bird became a trustee for Subchapter V bankruptcies, she figured it would lead to a couple of clients a year at best. It had such a small debt limit, after all: just $2.7 million. Plus, the economy was strong.

Then COVID-19 hit, the CARES Act (Coronavirus Aid, Relief, and Economic Security) was signed into law, and the debt limit for Subchapter Vs was raised, at least temporarily, to $7.5 million.

“That opened the floodgates,” she says. “In one week alone, I got assigned to three cases.”

Bird, a bankruptcy attorney with Kaplan Johnson Abate & Bird in Louisville, has long felt the need for a reorganization bankruptcy filing for smaller businesses with smaller debts; and Subchapter V, signed into law in August 2019 and enacted in February 2020, was exactly that. 

“You don’t have to pay quarterly fees, you don’t have to get a consensual plan through, your creditors don’t get to torpedo it if they want to,” she says.

You’re able to propose a plan, and the only person that you have to make happy with your plan is your Subchapter V trustee.”

Her Subchapter V clients are from a variety of industries. “One is an underground tank builder, one is a rental management company, another is a timberer,” she says. “One is a hormone-therapy replacement drug facility that had locations across Kentucky and in Ohio. Once the pandemic came in, and they were shut down as an optional service, they couldn’t see patients. They were struggling. So they ended up in Subchapter V as well.” 

As the pandemic continued into the summer, Bird wasn’t seeing the usual Chapter 7s and 11s. Subchapter Vs were ousting Chapter 11s; instead of Chapter 7s, she was dealing with straight-up closures. “The reason why you don’t file a Chapter 7 is because, with these places I’m representing, there’s a bank that has a lien on all of their assets,” she says. “So I usually just call up the bank and say, “They’re not going to make it. Come get your stuff.”

She’s tried to advise her clients to be proactive, but last summer there were a lot of PPP loans and stimulus checks floating around, she says. Also false hope. “So I just wait for them to call me back. But a lot of times when they call back, it’s too late. They’ve waited too long. They’ve blown through their retirement.”

In terms of bankruptcies, she feels 2021 will be worse: “I know it’s coming.”

Read an in-depth interview on this topic with Charity Bird here.

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