Year In Review: Is Anybody Filing Bankruptcy in Nashville?

A few days ago, a lawyer from Oklahoma City called to refer me a new case, and, at the end of the call, he asked “Is anybody filing bankruptcy in Nashville? There’s just nothing going on here. Are you hearing anything about when it’s coming back?”

It’s a conversation I’ve had about 100 times over the last year, especially with local bankruptcy lawyers.

As of this moment (December 29), there have been 3,923 debtor bankruptcy cases filed in the Middle District of Tennessee in 2021. Compare that with 2011, when 12,546 debtor bankruptcy cases were filed. How on earth, in this economy and in month 21 of a global pandemic, has there been less than a third of the new cases we saw a decade ago?

For reference, here are the numbers for the past decade (plus):

  • 2021: 3,923
  • 2020: 5,616
  • 2019: 8,263
  • 2018: 8,577
  • 2017: 8,710
  • 2016: 9,198
  • 2015: 9,290
  • 2014: 10,089
  • 2013: 10,092
  • 2012: 11,827
  • 2011: 12,546
  • 2010: 14,063
  • 2009: 14,940

It’s clear that 2021 brought a historically low number of new bankruptcy case filings. It also shows that the Middle Tennesseans aren’t necessarily disinclined to file bankruptcy (or unable to, since so many of the past filers are not time-barred or ineligible under 11 USC § 109 or otherwise). So, why aren’t more people and businesses filing bankruptcy?

Some people refer to the influx of federal relief money and high wages, but I’m not seeing many debtors doing financially better now than they were in years past. 2021 appears to be as big a financial struggle as any of those years before it.

My guess is that the federal and local moratoriums on foreclosures and evictions are a big factor, since so many potential debtors aren’t being forced into a filing to save a imminent threat to their home. For many residential and commercial lenders, even though the moratorium may not apply to their loan, the creditor is nevertheless taking no action, for a number of reasons.

From all over the creditor realm, I have heard for months to mark my calendar for “January 1, 2022,” which was when many of the “big” lenders were planning to turn the foreclosure machine back on. Of course, that was before this latest COVID variant completely reshaped the status quo.

I’d guess that the January 1 date is being moved farther out, especially since we’re back in the throes of an ever-evolving pandemic. While it’s impossible to predict what COVID has in store for us, it’s easy to see that all of the same factors and circumstances are present to keep mortgage lenders at bay.

As awful as it sounds, then, we won’t see more bankruptcy filings until–strangely–the economy gets back to normal and people return to regular life (which, if you ignore my prediction that filings would spike in June 2020, is basically what I said in this old post).

The Future of Law Office Space? You Can Keep your 5 Year Lease, I’ll be at WeWork

I really love my office space, but I don’t talk about it much.

I have space in a brand new building, right off Music Row. The office has every modern amenity you can dream of. Free wireless internet and utilities. 10 conference rooms, all set up for hi-tech video and audio. A variety of free coffee and drinks, in a modern and luxuriously decorated common area. Three full time staff to welcome guests, handle packages, and greet me in the morning. An outdoor patio that overlooks midtown Nashville. A few times a week, the landlord throws a party with free drinks, cookies, and networking with the other tenants.

When I was recognized as an Attorney for Justice last month by the Supreme Court, guess who was the first to congratulate me? (Spoiler-Alert: My landlords).

So, why don’t I talk about it much?

My office is in the Midtown Nashville WeWork, and, for a long time, I was worried that Big Fancy Lawyers did not have offices at flexible office spaces.

Why’d I think that?

In general, The Law is a profession governed by tradition and slow to embrace innovation.

Ask most managing partners, and you’ll find a distinct preference toward the “Ways Things Have Always Been Done.” With that mindset, then, the typical law firm office features fancy marble foyers, libraries with leather bound books, and spacious corner offices where the partners can enjoy a whiskey drink at 9pm (when all the associates are starting to leave for the day).

I’m exaggerating a bit, but it remains a world where a lawyer’s self-worth is often defined by the comparative size of his or her office.

This summer, at our neighborhood swimming pool, I was talking to a Big Law Firm lawyer, who was a little bitter about a large group of lawyers leaving her law firm to start the local branch of a Giant Law Firm.

You know what her most damning insult about the new venture was? “I heard their offices are in a co-working space.”

The suggestion being, of course, that, unless you have way too much space in a way too expensive building on a way too long lease, well, what’s the point?

For decades, law firms have focused on opulent physical spaces to suggest, indirectly, success and prestige, which they hope will result in more work from clients.

Hopefully, the newer generation of lawyers (and cost-conscious clients) will see all this for what it is and realize that the best way to impress clients is high-value, efficient billing and timely, good work.

Maybe COVID-19 and the success of working-from-home will be a watershed moment for the profession, with so many lawyers abandoning skyscrapers for our guest bedrooms. We won’t stay at home forever, of course, but will it be so easy to return to the Old Way, now that we’ve seen that billable hours aren’t necessarily worth more from the 26th Floor?

I’m not holding out hope. A few months ago, the Nashville Bar Association presented a “Future of Commercial Real Estate” seminar, which was held at a Big Law Firm’s brand new office spaces, in the most expensive building in town.

Maybe old habits are hard to break.

For me, when I left my Old Big Law Firm, I talked to my commercial broker clients about finding office space, and the conversations were always about 5 or 7 year leases, for a new venture that I had no idea where it would take me (and, boy-oh-boy, has it ever taken me a bunch of places).

I needed something flexible and that would facilitate my work, but that wouldn’t force me to work more just to pay my monthly rent.

My office set-up has been good for me. It’s a gorgeous space, with every amenity I need, and I have the ability to grow or to shut it all down, without navigating the intricacies of a 7 year lease.

Also, I’m neighbors with Amazon, ML Rose, Bethel College, and dozens of tech companies whose names I can’t pronounce.

I can’t say enough positive things about my space. I’d say more, but, as I’ve been typing this, I got Katie’s email about the Christmas gift wrapping/hot cocoa party…

Zillow’s Failure Hasn’t Slowed the Torrid Pace of All-Cash / No-Fuss Property Sales in Nashville

In the depths of the COVID-19 pandemic in June 2020, I bought a truck. And not just any truck, but a brand new 4×4 that was way bigger than the late model Nissan Leaf that I traded in.

When we returned to a semblance of normal life in the spring of 2021 (i.e. when Courts began to require in-person appearances), I realized how much I hated driving a truck on downtown streets.

Well, the actual realization occurred at the top level of the Williamson County Judicial Center parking lot, when there were no parking spots and I had to turn my giant truck around in a tight space and find street parking. I’ll yada yada the parts about me backing into a tree while parallel parking a few minutes later and, by the end of the day, getting a Carvana purchase offer.

But, long story short, Carvana gave me a no-questions/no-fuss offer on my (fixed) truck, in a process that was weirdly easy. I was used to having to run a newspaper ad and have strangers come to my house for test drives (or, worse, dealing with a used car salesman).

That’s their business model–disrupt the traditional market by making an onerous process so easy.

Which is exactly what Zillow was doing in real estate, and which ended in failure.

But don’t think that Zillow’s failure is an indictment of the business model. It’s alive and well in the Nashville market.

When I look at the recent property transactions in the Nashville Ledger, all I see are weird LLCs, buying lots and lots of properties. Look at the picture below. Sfr Xii Nashville Owner 1 LP. Opendoor Property Trust I. Mile High Borrower 1 Value LLC.

My personal favorite is the buyer named “Rich af LLC,” the new owner of some prime real estate on 1st Avenue.

The business model is straight-forward. These buyers approach owners with a quick, no-fuss, cash offer, and, then, they hope to flip the properties (after renovations or maybe not), safe in the assumption that the Nashville real estate market is going to justify their confidence.

Zillow’s failure drew a lot of national attention, but, if the past 60 days of transactions are any indication, the business model is alive and well in Middle Tennessee. In fact, Zillow’s crash and burn appears to be good for Nashville property investors–not only is there one less competitor, but there’s an assumption (among property owners) that “buying low/selling high” isn’t a viable business, and they’re lucky to get quick-cash offers on their properties.

When Carvana offered me nearly 95% of retail value for my 10 month old truck, I was surprised (and couldn’t get it there fast enough). I kept waiting to find out what the catch was–would there be some secondary negotiation or some other trick? (There wasn’t.)

I suspect Carvana was confident that they’d easily find a buyer in a great selling market, and I’m betting that’s what these Nashville property investors are doing too.