By now, it is common knowledge that the spread of COVID-19 and the accompanying social isolation measures taken to slow it have ravaged the economies both stateside and worldwide. Industries even tangentially related to tourism and hospitality have been hit especially hard. When people aren’t traveling and are holed up at home, they aren’t renting cars. This is not only happening in Mesa and Arizona. It is a pandemic throughout the country. The 2020 Coronavirus has sent the country into a state of economic uncertainty.
Bankruptcy Options for Businesses
While Individual filers typically choose between Chapter 7 and Chapter 13, businesses opt between Chapter 7 and Chapter 11. Chapter 7 discharges almost all debts without repayment, but a company that chooses it must surrender all its assets and cease operations. In Chapter 11, the company cedes authority over big business decisions to its primary creditors while continuing to operate.
If Hertz files bankruptcy, it will be soon- it has a deadline of May 22, 2020, to produce $400 million for its creditors. Its two primary banks, Deutsche Bank AG and Barclays PLC, will be the ones to decide whether to let the company sell its assets or if it should file bankruptcy. This suggests that Hertz would be filing a Chapter 11 and not a Chapter 7 bankruptcy.
Alternatives to Bankruptcy
The company has two main options to avoid filing bankruptcy. The banks may choose to let Hertz take out new debts. This option only works if the market improves in the next few months. Otherwise, the company could sell some of its 560,000 car fleet. Although used car prices have dropped approximately 11% since the pandemic began, demand for car rentals has dropped even more and may not fully recover post-pandemic.
What does this mean for consumers?
Used car prices have already plummeted, and will continue to do so if Hertz floods the market with used cars from its fleet. Car dealers already have been offering special deals such as no down payment or delayed first payments due to coronavirus. The used car market is about to become even more of a buyer’s market.
Even if you’re considering Bankruptcy
Just because you’re considering filing bankruptcy doesn’t mean you can’t take advantage of the buyer’s market if Hertz floods the market. If you file a Chapter 13 Bankruptcy, you will have to wait 30 days after financing a vehicle to file your case. After your case is filed, you will need permission from your trustee to incur new debts.
Whether you’ve been struggling financially before the pandemic, or you’re a business owner impacted by quarantining, our office can help. We offer free phone consultations so you can determine which chapter to file and discuss your case. We offer Zero Down Bankruptcy so you can pay for your case in affordable installments after your case is filed. Call to get started today!