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West Michigan smoke shop first in area to benefit from new bankruptcy law

Purple East credits law for survival during pandemic
Posted at 5:26 PM, Oct 30, 2020
and last updated 2020-10-30 17:26:48-04

GRAND RAPIDS, Mich — A West Michigan business is the first in our area to benefit from a new Chapter 11 Bankruptcy law.

Smoke shop, Purple East was able to take advantage of the Small Business Reorganization Act essentially saved them at a time when many are struggling. They think other small business could benefit too.

Purple East President, Drew Phillippy said, “This was ultimately something that helped us survive.

”This year is not going as Phillippy had planned to say the least.

He said, “Last year we had four locations. We had Downtown and Plainfield; they were doing so well that we added the Alpine an 28th Street locations last year, expecting that in two or three years, those locations would really be booming. Unfortunately with COVID, this year there really wasn’t going to be a very positive outlook for those locations.”

With four times the leases, loans, and other costs, Phillippy said they made the choice to file for Chapter 11 Bankruptcy in April.

“It allowed us to break contract with the leases that we didn’t need and to renegotiate the loans that were too expensive to pay for as a one location business,” Phillippy said.

The Small Business Reorganization Act passed by Congress last year, lowers costs, and streamlines the process for smaller businesses to adjust their plans and finances.

Phillippy said, “Chapter 11 has been around for a long time for larger corporations that are trying to consolidate hundreds of thousands of dollars more debt and it used to cost about $200,000 to get through the process and now it’s about $20,000.”

FOX 17 spoke with Steve Bylenga, Partner at Chase Bylenga Hulst, PLLC, who helped Purple East get their bankruptcy plan confirmed in the Western District of Michigan in about 6 months.

Bylenga said that this option is a true lifeline for small businesses who can’t afford a sometimes years-long Chapter 11 legal process.

That’s something Phillippy wholeheartedly agrees with.

“I think in 2020, there should be no shame in admitting that this year has been financially difficult for every business,” he said.

While it wasn’t an easy decision, Phillippy is thankful to carry on a 45 year West Mhicigan tradition and knows it’s just one bump in a hopefully, very long road.

“It really does mean a lot to be able to carry the torch and to hopefully grow it back into something great again in the future.”

Chase Bylenga Hulst, PLLC said they’re getting a lot of phone calls from small businesses, especially in the restaurant and hospitality industry about potentially filing for Chapter 11 under this new law.

You can visit the remaining Purple East location 2221 Plainfield Ave NE in Grand Rapids.