Articles Posted in Credit

This piece from the Wall Street Journal’s Real Time Economics site answers the question with charts galore! The short answer comes in 3 parts:

1) For working people, 2013 was more of the same slow, jobless recovery;
2) For high net-worth individuals and corporations it was a bonanza; and;
3) The housing sector underwent a slow, painful, and uneven half-recovery.

Check it out here.

WSJ Real Time Economics 2013 Graph

House Underwater

Where Did the Equity Go?

If you’re an Illinois homeowner chances are any equity you had in your home disappeared between 2008 and 2011; and hasn’t been seen since. If you’re lucky that equity may start crawling back to “normal” levels in 2013; but if you haven’t seen it happen you’re not alone. Despite recent reports in the news about recoveries in California, Arizona, and Las Vegas, Illinois property values continue to languish. Of course it’s not all bad news. For instance, as of January the overall price of housing in the Chicago area was up 3.3% from a year ago, with condo prices up a robust 5.8%. Then again, the Illinois foreclosure rate has merely leveled off rathern than falling as it has in other States. And as the “jobless recovery” grinds on, a few basic truths are coming to light:

The value of real estate is still well below pre-crash levels and many people borrowed against those inflated values. These people owe well more than their homes are worth.

Result: These borrowers can afford to keep paying, but they know that doing so is tantamount to throwing good money after bad. They don’t really want to keep making monthly payments on loans valued at 2 or 3 times they market price of their homes.

Moreover, many who who managed not to over-borrow still find themselves in trouble because they have suffered irreversible job loss or were forced to take a lower-paying position. Often these jobs come without benefits like insurance.

Result: This leaves many with no option but to make payments on excessive loans with high interest rates until something unexpected happens and their system crashes.

Are Write-Downs The Solution?

Members of Congress, Administration officials, analysts, and pundits, have all speculated that if mortgagees adjusted homeowner indebtedness down to the value of their homes, the result would be a tide of debt forgiveness that would lift all boats. In other words, they advocate a write down of mortgages by banks to match the value of the underlying real estate. The result would be the one-time elimination of billions in phantom real estate value. Of course banks would be left holding the bag… but the last time that happened the government came to the rescue. Could it work again?

Is DeMarco the Bad Guy?

The consensus on the feasibility of write downs has been growing for some time. Now even quasi-government enterprises like Fannie Mae and Freddie Mac support these kinds of mortgage loans now. So why aren’t write-downs being used more? Illinois Attorney General Lisa Madigan puts the blame on one man: Edward DeMarco, the head of the agency that regulates Fannie and Freddie. DeMarco has stated on the record that he does not believe write-downs would resolve the nation’s foreclosure problems, and that on the contrary, their use would force banks to write down billions in non-performing loans then turn around and seek another bailout at taxpayer expense.

The Controversy Over Write-Downs

In March 2013 Attorney General Madigan and 8 other State Attorneys General called for DeMarco to resign because he had impeded the best chance that most homeowners would ever have to get on track. Whether or not that allegation is true, the controversy raises troubling questions. No place is this more apparent than Illinois, where home values remain low.

According to the Illinois Assistant Attorney General for Consumer Fraud, borrowers will be forced to struggle with their mortgages for years because of DeMarco’s refusal to permit Freddie and Fannie to accept write-downs. Attorney General Madigan echoed those sentiments in her own statement on the subject.

Arguing With The Administration

The position espoused by the AG’s has garnered support from Washington heavyweights like Tim Geithner, former Treasury Secretary, who wrote to DeMarco in July 2012 to say suppressing write-downs was not in the best interests of the nation. Secretary Geithner also noted that strategic principal reductions, as they are known in Washington, are effectively the only way for homeowners to escape crushing subprime mortgages, and that the economic rebound resulting from widespread write-downs would benefit taxpayers far more than it would cost them..

DeMarco Remains Intransigent

In October 2012 Bank of America analysts predicted that DeMarco would resign his position or be forced out. Some analysts even thought that if President Obama were reelected he would fire DeMarco by December of that year. When that didn’t happen, 45 members of the House of Representatives called for DeMarco’s removal. Attorney General Madigan made her demand a few months later. Despite everything however, DeMarco has retained his position and continues to stand fast in his refusal to allow mortgage write-downs as a legitimate means of extinguishing mortgages owned by, or backed by, Freddie Mac or Fannie Mae.

What will happen in 2013? If write-downs are not an option, many will find themselves looking at programs like HAMP and HARP to manage payments while others will find that Chapter 13 is the most expedient way to deal with their situation.

To find out which route might work for you, feel free to call for an appointment or contact us directly using the form on this page. We look forward to speaking with you in confidence.

About the Author
Robin Lewis is a business development professional with a real estate background. She is currently a senior writer at, which covers trends in real estate, financial stability, and economics.

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Yes Virginia, it is possible to both discharge unsecured debts forever (Chapter 7) and strip down secondary mortgages (Chapter 13). The result is a so-called “Chapter 20.” But should Debtors file two cases when it’s hard enough to put themselves through one? Read on and find out.

When Is Chapter 20 a Good Idea?

There are situations that fairly cry out for Chapter 20 treatment:

Situation #1: Debtor is burdened with priority unsecured obligations like IRS debt, that must be completely retired in Chapter 13. But that would yield unsustainably high monthly payments. By contrast, once the Debtor’s unsecured obligations are discharged, the resulting Chapter 13 plan payments become downright manageable. Chapter 20 is the solution.

Situation #2: Debtor’s mortgage exceeds the value of the Debtor’s home (i.e. the property is “underwater”). Chapter 7 cannot help the Debtor ameliorate their high payments or deal with their delinquent second mortgage. All Chapter 7 can do is give the Debtor an opportunity to reaffirm the mortgage(s) on the same outrageous terms. Chapter 20 is the solution because it permits the Debtor to treat its second mortgage like an unsecured debt and pay only pennies on the dollar to retire it.

How Does Chapter 20 Help, Exactly?
Chapter 20 works by reducing the overall amount of debt to be paid, then stretches that smaller sum over as many as 60 months. Practically speaking, Chapter 13 plan payments are determined by 2 factors:

  • The Means Test imposed by the 2005 BAPCPA Amendment to the Code; and
  • The amount of secured claims, arrears, and priority debts the Debtor must pay

This is where Chapter 13 Debtors may take advantage of the lien strip – an option not available in Chapter 7 – that allows them to treat secured loans on owner-occupied property as unsecured, and pay down those loans at far less than face value.

What is Lien Stripping, Again?

Lien stripping is the process of treating some “secured” loans as unsecured: it applies only when the property in question is “underwater” – i.e. its market value is exceeded by the face value of the primary mortgage. In that case the 2nd mortgage or home equity line of credit (HELoC) is really unsecured and may be paid under the plan of reorganization at the same rate as other unsecured debt – $.10 on the dollar, $.50 on the dollar, etc. And Boom! goes the dynamite.

Are People Using Chapter 20 Successfully?

In re Davis, 4th Cir., slip opinion 12-1184 (2013), the latest case to discuss the legitimacy of Chapter 20 lien strips, points out that Chapter 7 eliminates personal liability but leaves in rem interests like mortgage liens undisturbed. It goes on to point out that an interest is “secured” only to the extent of the creditor’s interest in the
underlying real estate. See Code §506. Thus, if a house is worth
less than its primary mortgage then 2nd and 3rd liens are
unsecured by definition. And since §1322
of the Code permits the modification of the rights of unsecured creditors, a lien strip is both warranted by the facts and supported by the law. Finally, the Davis Court points out that while not every circuit has explicitly ruled
on lien stripping, the 2nd, 3rd, 4th, 5th, 6th, 9th, and 11th Circuits have, and all have permitted it.(Id.

at 7). 

Last But Not Least…

only remaining question is whether a Debtor must receive a discharge at the end of its
Chapter 13 case in order to complete a lien strip; or if the mere
completion of its plan of reorganization is sufficient. The issue
arises here because the BAPCPA mandates that once  a discharge is received in a Chapter 7 case the Debtor must wait 4 years to file Chapter 13 and obtain another discharge. Realistically however, a Debtor that has received a Chapter 7 discharge does not need a Chapter 13 discharge on top of it. Unfortunately, there is no consensus in this area.  Even in the Northern District of Illinois the answer
may depend on your Judge (cf In re Fenn, 428 B.R. 494 (Bankr. ND Ill. 2010) with
In re Anderson,
10-B-45294 (unreported)).


Bankruptcy discharges affect only personal (in personam“) liability: a discharge does not simply cause liens on property to disappear. As set forth in Sec.1322(b)(2) of the Bankruptcy Code, a plan of reorganization may only modify the rights of unsecured creditors. A lien strip exposes the wholly-unsecured lien on real property and, under the auspices of Code Section 506, allows the Debtor to pay off that “secured” interest for pennies on the dollar, as if it were merely an unsecured interest (which it really is).

Sure, a Chapter 20 lien strip is just the thing for homeowners with too much unsecured debt and a lousy second mortgage or HELoC hanging over their heads. But is it right for you. Call us in confidence to find out. Happy stripping!


Everything Was Going Fine Until…

Your customer or borrower has been paying like clockwork and you, the creditor or vendor, have been dispensing goods and services as promised. Then your customer starts to pay a little later, then later still. Why not? Times are tough. So you do the decent thing and take their payments without complaining. Next thing you know, your customer seeks bankruptcy protection, leaving you holding the bag for thousands, tens of thousands, even hundreds of thousands of dollars worth of goods and services. Money you’ll never see again. 

The Worst Part Is (Not) Over

You’re out a lot of material, and now you’ll never get paid. Sure that’s tough to take, but at least the worst part is over, right? Wrong.

All sums paid by customers or clients in the 90 days before a bankruptcy is filed are de facto preferences. In other words, sums paid in the 3 months before a bankruptcy case is filed can be recouped by the Bankruptcy Estate without a guaranty of ever getting that money, or any portion of it, back.

Most creditors think that once a payment is received, all is good and they can move on. This is not the case if a customer filed bankruptcy. Sections 547 and 550 of the Bankruptcy Code allow a Trustee (in Chapter 7 cases) or Debtor in Possession (DIP) in Chapter 13 or 11 cases to recover preferential transfers

Will you have this problem? Was your customer’s payment a preferential transfer? Short answer: “Yes it was” if

  • payment was for the creditor’s benefit    See 547(b)(1)
  • on account of antecedent debt   (i.e. bought on credit)
  • for goods or services that were received  See 547(b)(2)
  • while a Debtor was insolvent as defined  See 547(b)(3)
  • within 90 days before a bankruptcy filing See 547(b)(4)

Note: It is immaterial whether the vendor or creditor knew, had reason to know, or suspected a borrower or customer was about to file for bankruptcy or was insolvent. Once the case is filed the 90-day look-back is automatic. See 547(f)

Taken literally these rules mean creditors ought to stop lending, and vendors stop selling, if there is any concern about the financial health of the borrower or customer. Of course if that happened creditors and vendors could fail themselves. So what should creditors really do? While there is no one-size-fits-all answer, here is a list of 3 Don’ts and 1 Do If a Customer or Borrower Files Bankruptcy:


  • Volunteer to return sums paid by your Customer or Borrower. The case Trustee or DIP must first calculate what is due, decide whether to attempt to recoup it, and file a motion with the Court. 
  • Contact your customer and raise hell – that will only make things worse.
  • Represent your own interests in Bankruptcy Court. You wouldn’t perform brain surgery on yourself, would you?



Why only a single “Do?” And why put it in all caps? Because Bankruptcy Courts already favor the Trustee or DIP. Failing to hire a good lawyer to argue on your behalf if like bringing a knife to a gunfight, partner.

Defenses to a Preference Action

All doom and gloom aside, there are defenses that creditors can use when confronted with a motion to recover preferential transfers.The 2 most common defenses are 

  • Contemporaneous Exchange for Value; and 
  • Payment in the Ordinary Course of Business

A so-called Contemporaneous Exchange is essentially a COD arrangement. The creditor will supply goods and is paid on delivery or within a few days thereafter – functionally at the same time. These payments can be defended as non-preferential transfers.

The Ordinary Course of Business defense is more subjective: it relies on the way the parties treat each other. For instance if a vendor supplies goods to the buyer on a standard basis like Net-30, and the buyer pays as envisioned, then the payments made according to those terms can be defended as non-preferential transfers.

The Limits of the Ordinary Course Defense

Several recent cases have weighed in on the Ordinary Course of Business defense and shed light on the limits of this theory. 

In In re Universal Marketing, 481 B.R. 318 (Penn. E.D. 2012) the Chapter 7 Trustee sought to recover two $25,000 payments made to the Debtor’s financial advisor. An Engagement Letter had been executed before the bankruptcy providing for 7 months worth of service at the rate of $25,000. The Debtor had made its monthly payments, but some had been late: opening the door for for the claim that no ordinary course defense existed. The Court disagreed, and found that the subject payments were made in the ordinary course of business. In its Opinion, the Universal Marketing Court considered the following facts:

  • the existence of an agreement (the engagement letter)
  • the services offered were of the type the debtor needed
  • the creditor was in the business of providing such services
  • length of time during which the arrangement was in place
  • that the payments were typical for such an arrangement
  • that the creditor did not exert undue influence to get paid.

The Court found the payments under consideration to be consistent and proportional to fees charged by the creditor for like services to other customers. This only left the occasional late payment. But the Court noted that this amounted to just a few days: too small of a divergence to transform them into preferential transfers. 

In re Mainline Contracting, 2012 WL 5247173 (N.C. BK 2012) was a Chapter 7 case involving not only late payments by the Debtor but lax collection tactics by the vendor. To begin with, Invoices clearly labeled “Net 30″ had seldom been paid within 30 days by the Debtor. What’s more, in the year leading up to the bankruptcy filing the Debtor took an average of 79 days to pay, with the number creeping up as the Debtor neared its bankruptcy filing date. Then there was testimony that the Debtor actually never paid before 90 days, unless the creditor called or emailed to inquire. There had also been a number of instances in which the Creditor put the Debtor on a COD basis due to its poor payment history, the Debtor would catch up, and the whole process started over. Eventually the Debtor filed for bankruptcy and the Trustee sought to recover certain payments.

The Marine Contracting Court found that the payments in question were not preferences, and thus not avoidable. In reaching its decision the Court noted that

  • although the invoices read “Net 30,” that was not the practice of the parties
  • the creditor would continue to supply materials on credit even when not paid
  • it was only after invoices were 60+ days overdue the creditor demanded payment
  • it was only after invoices were 90+ days overdue that the creditor switched to COD
  • such behavior was consistent over both the baseline period and the preference period 

The weightiest factor in the Court’s analysis was the behavior of the parties during and before the the 90-day preference period.The consistency of that treatment indicated that these were truly payments made in the ordinary course of business.

Take-Away:What Does It All Mean?

The takeaway from this discussion is that creditors should strive to be consistent in the way they treat customers. Talk to cistp,ers about past-due payments. Follow up consistently and in a timely fashion. If payment terms are “Net 30″ for instance, send reminders at 45 and 60 days. And if a customer is a bad payer consider COD or a prepayment arrangement. After all, if credit is not extended there can be no preference action.

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Written by Jonathan Trent and Mazyar Hedayat  Edited by Mazyar M. Hedayat, Esq.

Small business remains the backbone of the most vibrant economy in the world. America leads in innovation and hard work thanks in large part to small businesses and entrepreneurs. But despite the best intentions of their owners small businesses have a high failure rate; especially in the first few years of operation. 

But why the high failure rate? One of the most common reasons is that the business owner, entrepreneur, or manager of the business 

  • underestimated the competition, or 
  • overestimated the business itself. 

And that makes sense: often business owners, managers, and key employees convince themselves that they can ride out storms in the market or overcome the negative economy by squeezing themselves, their employees, and their company. But in lean times like these a single misstep can be fatal; and above-all responsible business owners are realistic. That’s why Bankruptcy reorganization has been part of our law since the framing of the Constitution – at first among the States, and more recently through Federal Bankruptcy Code. And the institution of bankruptcy – whether liquidation or reorganization – exists for a good reason: sometimes you need to start over.

Additional Causes of Small Business Failure

Of course in addition to the 2 already mentioned, there are myriad reasons small businesses fall on hard times and become unable to recover. For instance, even in the best of times a small business can be plagued by inadequate bank financing and impatient trade-creditors: all it takes to knock over the balance sheet at that point is a stiff breeze. That’s where the recession, the recent real estate crash and subprime mortgage debacle, and good old-fashioned overseas competition, come in. These structural economic problems make everybody nervous: customers, suppliers, employees, lenders, and management. All it takes is one non-paying customer or a saturated market to tip over the business and cause a vicious cycle.

Growing Smarter All The Time

Once problems begin to surface they must be dealt with quickly and efficiently. If not, then mounting debt, management panic, impatient creditors, employee confusion, dissatisfied customers, and a dwindling revenue stream will create the “perfect storm” for failure. But does that mean businesses should insulate themselves from debt by casting aside the opportunity to grow? Obviously not: saying “No” to growth is not a rational choice. Luckily, businesses in search of smart, lean ways to grow have more options now than ever:

Global Talent

Successful businesses are founded on the backs of effective and dedicated employees. You need a pool of talent and experience, but what happens when the most qualified people don’t live anywhere near your location? You could settle for less-qualified employees, or you could try to convince them to relocate – both options could end up costing you more in the long run.
The more effective option, if it is possible in your line of work, would be to allow them to work remotely and communicate through teleconferences, video chats, instant messaging and a host of other options for keeping in touch. Documents can be sent through email, if you’re a traditionalist, or they can be uploaded directly to a central depository where other members of the company can have instant access.

Careful budget control is a critical element of any business endeavor, and working with skilled employees in different locations is a cost effective way to recruit the talent you need without overspending. This is also a simpler way to scale the business according to demand – it’s easier to bring in employees on an as-needed basis like this to complete projects rather than to try to acquire more space in-house for new employees.

Client Communication

Finding and working with new clients and customers is an ongoing process for any company. If you are providing consulting, legal, or financial services, it is possible to use those same communication tools to expand your client base and get beyond the local geographic restrictions. Again, this must be done with a careful strategy in mind, because it is easy to overreach here, as well.

Modern tools provide many opportunities for reliable and effective communications, but that may not be the source of your problems. These tools may open up some new channels, but if you are too far behind on your work, or trying to deal with too many clients at once, it won’t make a lot of difference. Perhaps it is best to think of these solutions as a way to complement your business and make your services better. Just make sure that you can offer the same, quality experience to every one of your clients – wherever they are.

Growth With Security

The faster a company grows, the more prone it is to overlook or miss an important security element which can lead to a lot of problems in the future. Digital security is a major issues, and there have been many companies over the last few years that have suffered major breaches. As you add more people to your company – whether remotely or in-house – make sure that they all understand the proper security measure so that important company and client data is never lost.

In the end, it’s about using all the tools at your disposal to create a strategy that will help you avoid bankruptcy. Define your goals, don’t force growth for the sake of growing, and save money wherever you can. This will help you be more profitable in the long run and provide a convenient and effective working environment for employees.

Getting Good Advice Is The Key

Congratulations! If you’ve made it this far then you want to be prepared and, better yet, avoid such growing pains altogether. So here is the best advice you’ll ever get along these lines: assemble your business SWAT Team before the worst happens. Your SWAT team consists of accessible, trustworthy, knowledgeable professionals you can turn to at a moment’s notice:

  • Attorney
  • Accountant
  • Insurance Agent


  • Real Estate Agent
  • Marketing Person

Begin putting your team together by talking to us. We have been providing advice and counsel to small businesses and their owners – from business law to bankruptcy reorganization – for nearly 20 years. In fact, I earned a Master’s Degree in Business Administration even before I was a lawyer. 

Feel free to reach our office using the Contact Form on this page. To learn more about how small business can survive and thrive in the new (new) economy, download our Free ReportAnd thank you for your time.

About Jonathan Trent
: Jonathan Trent is a web marketing specialist with NextUC, which provides audio, video and web conferencing solutions. He is a sports fanatic that enjoys writing about the internet and modern technology. He has written several respectable articles about the advancements and future of communication and technology.

About Mazy Hedayat: Learn more about Mazy Hedayat and M. Hedayat & Associates, PC on our Website.

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By Andrew Jackson  Edited by Mazyar M. Hedayat, Esq.

In this post we will skim the surface of how the Automatic Stay, put into effect via Section 362 if Title 11 of the United States Code, helps clear the air for people and companies that file Bankruptcy; allowing them to repay their creditors the best they can. What Is the Automatic Stay? Bankruptcy is the Federal process by which an individual, a couples, or a business entity is permitted to shed liabilities and obtain a fresh start. This process can take the form of a one time liquidation or a reorganization that unfolds over time. But all forms of Bankruptcy have one thing in common: the Automatic Stay found at 11 USC 362.  So what is the Stay? It is

a self-executing, universal injunction that goes into effect the moment a case is filed and keeps most creditors from exercising control over the assets of the Bankruptcy Estate.

Why An Automatic Stay?

To ensure that similarly-situated creditors get treated equitably in a Bankruptcy, Congress wrote the Bankruptcy Code to ensure that nobody could get the advantage. The Automatic Stay ensures that there is enough to go around, and that no single Creditor gets too much; even if what is left to distribute is only pennies on the Dollar. Under the Code, fairness equals equitable distribution.To ensure fairness, Section 362 makes it a punishable offense for most creditors to take actions such as:

  • Filing or pursuing a lawsuit to collect
  • Garnishing wages or issuing a citation
  • Filing or foreclosing a mortgage or lien
  • Demanding payment orally or in writing

What if the Stay is Violated?

Because the intent of Congress in creating the Automatic Stay was to usher in a quiet period during which the Bankruptcy Trustee could take stock of assets and liabilities without having to fight the Debtor’s battles, penalties for violation of the Stay are harsh. Any breach of the peace, with or without the creditors’ knowledge, is considered contempt of Court punishable by injunctive, monetary, and in proper circumstances punitive, damages. This is worth repeating:creditors can be punished even if they did not know  that they were violating the Automatic Stay. As long as the Stay is in effect – that is, a Bankruptcy case was filed – violation by a creditor is a civil offense. Note however; Congress considered some things too important even for the Automatic Stay. Thus, Criminal matters are not affected; nor are family law (i.e. Divorce) matters.

How is the Automatic Stay Put Into Effect?

Neither a Debtor, the Debtor’s Lawyer, nor the Court needs to take any action to activate the Stay – it comes into existence by operation of law when the case is filed. How do creditors know? Every creditor listed in the Bankruptcy Petition is served notice by the Court Clerk.

What if My Creditors Say They Didn’t Know?

All creditors identified in the Petition receive notice of the case from the Court Clerk, and all recipients are bound by the provisions of §362 whether or not they know they are violating it. You read that right: even if a creditor was unaware of the Stay when they violated it, they can nonetheless be punished by the Bankruptcy Court. In fact, the Automatic Stay is so powerful that it restrains not only creditors but the majority of Judges and Attorneys from exercising dominion or control over assets of the Bankruptcy Estate.

How Long Does The Automatic Stay Last?

In practice, the Automatic Stay lasts for a relatively short time in the case of liquidation and much longer in the event of reorganization. In Chapter 7 the Automatic Stay protects all non-exempt property that can be administered by the Trustee for about 90 days (the length of most Chapter 7 cases). That is, until a discharge is issued, the Stay protects all items in the Bankruptcy Estate. In Chapter 11 and 13 the Stay remains in effect for as long as the Plan of Reorganization is active. In Chapter 13 that means a maximum of 5 years. In Chapter 11 that means a long as it takes to repay creditors according to the Plan approved by the Court and a majority of unsecured creditors. Wrapping It All Up After reading this article it should be evident that the Automatic Stay is a powerful tool. While we have discussed only a fraction of its ramifications here, you should now have a better understanding of this portion of the Bankruptcy Code. Take advantage of your new appreciation for the law by contacting M.Hedayat & Associates to set up a free telephone or office consultation.

Continue reading →


Guest Post By Jonathan Trent
Edited by M. Hedayat, Esq.

It’s that time of year again! As January winds down business owners are contemplating new projects, new ideas, and New Year’s resolutions. Putting together resolutions can be an eye opening experience… or a chore. Sure, you want to continue improving what works, weed out what doesn’t, and learn from the past to avoid making the same mistakes in the future. But when the rubber meets the road, how do you make that call?

Here’s a simple method that has been used by small businesses for year.

(1) Review the significant business events of the past year – marketing, financial, etc.

(2) Ask yourself “What worked? What didn’t? Could we have avoided that problem?”

(3) This is critical: repeat the process until you have turned over all events in detail

(4) Prepare these 3 distinct lists (be prepared to write and rewrite them as needed)

Things I Should Do Again: these worked and should be part of your workflow

Things Never To Do Again: these didn’t work, or they hurt more than helped

Tweak and Try Again: With changes, these practices could work

Sounds easy, right? Too bad it’s one of the hardest things you have to do as a business person. Not only is the self-reflection challenging, but the act of turning objective facts into recommendations and then seeing those recommendations through is… well, it’s what distinguishes good businesses from great ones.

Until you really complete your own business evaluation and give yourself a business-practices audit (a more formal term for this process), here are 5 New Year’s resolutions being put into effect by businesses right now!

Be More Earth-Friendly

There are several ways a business can go green. Using less power and less paper is a good start. Buy recycled materials. Install energy efficient lighting, heating, and cooling. This not only helps the environment but your business costs as well. You may be surprised how much a company can save after one year of saving energy and cutting costs.

Improve Communications

Install a new office communications network. Office phone systems can be built to suit your needs. Connect all your employees like never before. Get high-tech with voice activated phones, 3-way calling, and messaging services. Information is relayed quicker and clearer when all departments are better connected. Messaging and conference calls can help to bring in new clients and seal important deals.

Reevaluate Company Policies

Send out a new list of rules and standards and make sure all personnel know what is expected of them in any situation. What is the company’s policy of on social media? What are the consequences if it is misused during work hours? What should employees do if there is an emergency, power outage, or natural disaster? Making everyone aware of what is expected of them leaves no gray areas or confusion.

Offer Achievement Incentives

Gather and showcase the best employees based on sales figures, leadership, or morale. You could also send top employees to leadership or group training seminars. It’s amazing what this can do for your company. You may see a great change in your staff. Plan and implement team meetings, pep talks, or even parties. A lively, encouraged team will want to excel and work in a fun environment.

Financially Prepare for Next Year

Create a nest egg and be financially secure. You never know if certain laws may be passed and it means drastic company changes. You need to prepare long term. Be ready for possible problems that could result in company losses. Owning a business can be tough and you many need to take extra care to avoid paying more taxes, fees, or business owner penalties. Get business taxes done by a professional and keep perfect records.

And Finally…

Don’t forget to secure a Legal Audit to ensure compliance with applicable laws, regulations, and industry best-practices. How? That’s easy: contact M. Hedayat & Associates, P.C. for your Free Legal Audit. With over 18 years of legal experience under his belt, a string of start up companies to his credit, and an MBA in addition to his law degree Mazy Hedayat is ready to roll up his sleeves and tell you where your business stands from a legal perspective.

About the Author: Jonathan Trent is a web marketing specialist with NextUC, a provider of audio, video and web conferencing solutions. He is a sports fanatic that enjoys writing about the internet and modern technology. He has written several articles about the advancements and future of communication and technology.

How does a company with $69.8 million in assets and only $9.2 million in liabilities end up filing for Chapter 11 bankruptcy protection? The answer is crime doesn’t pay, especially when you get caught hiring a hit man to make someone “stop breathing.”


An Offer A Creditor Can’t Refuse…Unless Someone’s Wearing a Wire.
Daniel Dvorkin, a local developer who was formerly in charge of Dvorkin Holdings LLC, was arrested in July after telling a federal informant that he would pay $100,000 for the informant to find a hit man that would make sure one of his creditors would sleep with the fishes. The cooperating witness was wearing an audio and video recording device for several of the conversations with Dvorkin. The target was an attorney who owned a corporation that had recently won an $8.2 million judgment against Dvorkin.

As the allegations against Dvorkin spread, Dvorkin Holdings filed for Chapter 11 bankruptcy protection in August. Despite the apparently strong balance sheet indicators (almost 70 million in assets against just 9 million in liabilities), the venture’s debts will almost surely rise as unsecured creditors will file foreclosure suits demanding what they are owed amidst Dvorkin’s legal mess.

Dvorkin Holdings owns stakes in properties across Chicagoland, including a large medical office building in Palos Heights and a commercial building in Lakeview. One of the venture’s largest projects, a 250-unit condominium building, was repossessed in 2010.

Back to (Bankruptcy) School
Chapter 11 bankruptcy protection is most commonly used by businesses, though individuals can also seek it under certain circumstances. A Chapter 11 is more advantageous than a Chapter 7 bankruptcy because the debtor can still operate the business under the supervision of the Bankruptcy Court, just with a reorganized payment plan to its creditors. Under the Bankruptcy Code, a trustee, normally the debtor, executes the Chapter 11 plan under the guidance of the Court. A Chapter 7 bankruptcy is a total liquidation of assets and means the business stops operating.

For Dvorkin Holdings LLC, the Chapter 11 buys the company time while Dvorkin’s legal proceedings play out. The Court may allow the debtor company to cancel certain contracts, or most importantly litigation against the company can be put on hold. For Dvorkin Holdings, this is a considerable advantage as many unsecured creditors are demanding payment for what they are owed. The creditors are obviously concerned that Dvorkin’s criminal proceedings will undermine the future of the LLC.

The Creditor Strikes Back
The company’s creditors are not simply rolling over for the Chapter 11 however. One of the creditors, Ohio-based FirstMerit Corporation, is seeking a separate and independent trustee for Dvorkin Holdings. Alluding to Dvorkin’s criminal charges, FirstMerit raised these concerns in their court appearance in conjunction with the Chapter 11. Under the Bankruptcy Code, all creditors are allowed to have their day in court to challenge the Chapter 11 plan.

A separate and independent trustee is someone who was not previously associated with the company. Considering the dastardly allegations against Dvorkin, FirstMerit has little faith that the company would act rationally if it were its own trustee, “(the creditors cannot) possibly be expected to have any confidence that (Dvorkin Holdings) is acting in their interests in light of these drastic allegations.” Dvorkin Holdings is owned by Daniel Dvorkin, his wife Francine, and their children. Under the Bankruptcy Code, a separate and independent trustee can be appointed if a creditor shows cause, which is legalese for strong rationale that the debtor will not operate the business rationally if it is its own trustee.

Crime Doesn’t Pay
While Daniel Dvorkin awaits trial, the future of Dvorkin Holdings and its Chapter 11 plan is murky. The Bankruptcy Court will have a challenge on its hands handling aggressive creditors hoping to get their money back before Dvorkin himself potentially heads to jail. Furthermore, whether Dvorkin is convicted or not, it would difficult to imagine the company’s reputation and business prospects will not be unsullied by the ordeal. On top of those headaches, Dvorkin Holdings will try to gain the best deal possible in part by arguing that Dvorkin is still innocent until proven guilty. Dvorkin’s lawyer has repeatedly stated his client’s innocence.

Is your business struggling? Are you staying above water but simply need extra time for business to pick up? Contact M. Hedayat & Associates today-we have been Chicago experts in all forms of bankruptcy as well as real estate and business law for nearly two decades.