As a bankruptcy attorney, Stuart Gold is on the ugly front lines of the coronavirus downturn. But he’s well prepared: he has been in the field for more than three decades. Since 1987, he has been a U.S. bankruptcy trustee, and he is a cofounder and managing partner with Gold Lange & Majoros, based in Southfield, Mich.
Thanks to government relief programs, bankruptcies haven’t started surging yet, but Gold says he’s expecting a “tsunami” of cases. He has some important messages for small-business owners who might find themselves in an unexpected financial bind, from new programs to take advantage of to the best way to think about bankruptcy. (“Failure” isn’t it.)
Gold recently spoke with Fortune for a new series, The Coronavirus Economy, about his work, how it has changed under lockdown, and what he sees coming.
This interview has been lightly edited and condensed for clarity.
Fortune: What does your workday look like, during normal times?
Gold: I’ve been a U.S. bankruptcy trustee since 1987. When an individual or a corporation applies for bankruptcy under Chapter 7, we examine the debtor and determine whether 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 that twice a month, for my trustee side. And there’s preparation for that, you have to review debtor’s documentation, to see if there are any assets that should go to creditors. I’m an advocate for the creditors, basically.
The other half of my practice is devoted to representing individual debtors filing for bankruptcy, as well as working with businesses to file under Chapter 11, or to handle their dissolution outside of bankruptcy.
How has the coronavirus changed your work on a day-to-day basis?
Well, normally my trustee hearings are in person. It’s me, a debtor, and debtor’s counsel, and any creditors, in a room to review their financial affairs. And in the same room are other cases to be heard.
But now we’re doing them strictly by phone. We have conference lines for debtors and debtors’ counsel to call in, and notice to the creditors that they can be on the line at the same time. We’ve been doing it since March, and we just got notice that it will continue at least through August.
It’s painful to be on a conference call with 50 people and one person doesn’t mute their phone. But attorneys are getting used to it, and advising their clients, “Hey, make sure your phone is muted.”
I’ve been talking to clients and doing the initial consultation over the phone, and we are securing documents remotely. We have to review documents, and I’ve been doing that through Zoom—to the extent that clients have the ability and the equipment. Some do, and some don’t.
What attitudes do people bring with them about bankruptcy?
I would say the majority of clients come in thinking it’s failure. There are a lot of tears when they come in. And we do our best to assure them bankruptcy has been around for centuries. It’s embedded in our Constitution. In a capitalistic society, bankruptcy is necessary to allow people a fresh start, and to let entrepreneurs try new things and give them a safety net. We want people to take chances.
They come in thinking that they’re a failure, and we try and build them back up and let them know that they’re only one of many seeking this type of relief. And it’s there for a reason.
A lot of people are in trouble out there, including a lot of people who probably never thought bankruptcy would be something they needed. Who should consider bankruptcy?
It’s important to talk to a professional and get advised of all your options—both bankruptcy and non-bankruptcy. People are aware of the stigma, and they should know how that plays out, for instance in their credit ratings. And they’re afraid of losing everything; they’re not aware of exemptions that can protect their assets. So a review of the situation is important.
For the business side of things, it’s important to realize that there are options other than simply closing your business and walking away, such as the restructuring available under the new Subchapter 5. That’s the important message: There’s just not one size that fits all. There are solutions to financial problems. I’ve done workouts without a bankruptcy where we just work with creditors. Every case is different, and it’s important that you get all the information.
The economic damage from the coronavirus is expected to be substantial. Does that mean more work for you?
It’s been the exact opposite of what you’d expect: The filings are way down, almost 50%. The relief packages passed by Congress have allowed people to survive and to not need bankruptcy relief at this time.
However, those benefits are going to run out. It’s anticipated that in the third and fourth quarter of this year, bankruptcy filings will rise dramatically. Someone referred to what’s coming as a tsunami, where the water is retreating from the coast, and then it comes in all at once and floods the lowlands. It’s coming—not just for individual consumers, but for businesses.
Are you preparing for that by adding staff?
Absolutely. During the height of the Great Recession, our firm had 30 employees, and we’re less than half of that right now. We anticipate we’re going to be ratcheting up and hiring in the third and fourth quarters, because of the deluge of filings.
Subchapter 5, sometimes referred to as “Fast Pass,” is a new kind of bankruptcy specifically for small businesses. What’s the advantage?
Congress passed it last fall, which has turned out to be very timely. The overall cost is going to be substantially reduced. And it’s very quick; you can be in and out in basically four months. And the approval process for the plan is more debtor-friendly than traditional Chapter 11.
When it rolled out, it was for businesses with debts under $2.7 million. Now they’ve [expanded] it to debts under $7.5 million. Those businesses can take advantage of this streamlined approach.
Your career has you interacting with people on what may be some of the worst days of their lives. How do you approach that, in terms of your bedside manner?
People do come in with a lot of financial and emotional burdens, losing businesses they have maintained for a number of years. We try and see if there are options. If it’s a viable business, we can consider a reorganization.
I’m dealing with individual debtors in my trustee calls who are very fearful. Bankruptcy may relieve you of debt, but it doesn’t put food on the table if you don’t have a check coming in.
These people are going through a lot of suffering—financial suffering, emotional suffering. So empathy covers my entire practice.
