Philly judge creates program to help small businesses reopen and negotiate with creditors

Philadelphia’s Commerce Court is setting up a small business aid program, similar to mortgage relief, that would allow struggling business owners to negotiate with creditors for more time, reopen, and ultimately pay back their debts.

The program is expected to be similar to Philly’s Mortgage Foreclosure Diversion court set up after the 2008 financial crisis.

Judge Gary Glazer last week issued the court order creating the small business-and-creditors program, and while it remains short on details, the idea is modeled on one created in Rhode Island earlier this year, he said.

Glazer, who is administrative judge of the commerce court program, wants local mom-and-pop businesses and nonprofits to take advantage of this program.

“A business owner would file a petition for an injunction. That injunction would stay any debt collections, or rent and mortgage payments while we sort out the issues,” he said. “We’re still dealing with set-up questions. Will we involve law schools? Will the parties be represented? It involves the appointment of a monitor, to contact the creditors and then mediate between business owners and collectors.”

Glazer said the program would create financial monitoring for small businesses who either had to shut down due to the COVID-19 pandemic or saw business substantially reduced.

“They’ll have to submit financial records, filed confidentially, and we’ll assess their eligibility,” he said.

Philly’s mortgage diversion court program worked this way: Homeowners, housing counselors, representatives for lenders, and other advisers came together to achieve a “work out,” or an agreement to keep residents in the home rather than moving forward with foreclosure.

The Mortgage Foreclosure Diversion Program was started by Judge C. Darnell Jones in 2008 in response to the national foreclosure crisis that grew out of the financial crash. The mortgage diversion program was viewed as a success, according to a Wharton student analyst.

“The program will focus on local businesses and nonprofit institutions that

were impaired for lengthy periods of time because of the pandemic and have been otherwise unable to generate sufficient income to pay debts or retain staff,” said a spokesperson for Glazer.

» READ MORE: Pa. to give $225 million in grants to small businesses hurt by coronavirus

One criterion might be if a small business, due to the pandemic, has debts exceeding income. Otherwise, there are not yet specific parameters beyond what is the order establishing the program, Glazer said.

“We’re talking to law schools to arrange for possible pro bono representation,” and the court may waive filing fees, although that hasn’t been decided, Glazer said.

For more information, you can call the commerce court’s law program: 215-686-4916 or email susan.packer@courts.phila.gov.

Commerce Court judges who will hear these matters include Glazer, Nina Wright Padilla, and Ramy I. Djerassi.

For the court’s manual on civil filings, business owners can visit the court’s website: https://www.courts.phila.gov/pdf/manuals/civil-trial/FJD_Civil_E-Filing_User_Manual.pdf .

To file an injunction here’s the link: https://fjdefile.phila.gov/efsfjd/zk_fjd_prvt_efile_00.secured_logon.

Unless working with an attorney who already has an account, business owners need to create a username and password in the court’s e-filing system (https://fjdefile.phila.gov/) to file a petition. Only electronic filings are currently available. City Hall offices remain closed.

“Court orders are like skeletons, they’re bare bones,” said Michael Snyder, a retired judge and head of the Philadelphia Bar Association. “That’s basically how these programs happen and get started. This is compassionate and forward-thinking. What can we as a court do to help [small business owners] rather than they file for bankruptcy?”

Separately, state Senators Vincent Hughes (D., Philadelphia) and John Blake (D., Lackawanna/Luzerne/Monroe) will join the secretary of the Department of Community and Economic Development, Dennis Davin, on Monday at 11 a.m. to announce the opening of applications for the Pennsylvania Small Business Grant Loan Program for those affected by COVID-19.

Also joining will be community development experts Mark Masterson of Northside Community Development Fund, Leslie Benoliel of Entrepreneur Works, Jim Burnett of West Philadelphia Financial Services, and Dan Betancourt from the Community First Fund.

Topics will include the first-round application window opening June 30, as well as eligibility requirements for small businesses and the disbursement of grants through Community Development Financial Institutions, also known as CFDIs. These nonprofits have some federal money coming their way in the form of grants for struggling businesses.

To join the Monday call, which is open to the public, dial in using one of the following numbers, then enter the meeting ID and password:

To join online through Zoom, click on this link:

https://us02web.zoom.us/j/86748599176

Meeting ID: 867 4859 9176

Password: 7P=DFU8Fj

For more information about the Pennsylvania Small Business Grant program, visit the website pabusinessgrants.com.