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Kentwood trucking company DIS Transportation files for Chapter 11 bankruptcy; attorney sees surge in filings ahead

BY Thursday, November 19, 2020 04:35pm

Plummeting freight rates paired with the economic slowdown that accompanied the COVID-19 pandemic took its toll on trucking company DIS Transportation LLC, leading the Kentwood-based business to file for Chapter 11 bankruptcy.

DIS Transportation, and its affiliate company DIS Express Inc., submitted its filing to the U.S. Bankruptcy Court for the Western District of Michigan last week. The filing was the latest in a growing number of cases filed under Subchapter V of the U.S. Bankruptcy Code, which was created by the Small Business Reorganization Act passed by Congress last year and took effect in February.

Steve Bylenga, partner at Chase Bylenga Hulst PLLC, representation for the company. COURTESY PHOTO

This designation of Chapter 11 bankruptcy is reserved for small businesses with less than $7.5 million in debt, and offers a streamlined process by accelerating the timeline and reducing costs.

In its filing, DIS Transportation detailed the financial hit it absorbed in 2018 when per mile freight rates dropped by 50 percent.

Despite working with a consultant to eliminate overhead and reduce liabilities, the company was unable to dig out from its financial hole, even after freight rates returned to pre-2018 levels shortly before filing.

DIS Transportation reported $568,532 in liabilities, $262,096 of it with unsecured creditors. 

Top unsecured creditors include PNC Bank ($99,810), Grand Rapids-based M6 Truck & Trailer Repair ($89,663.16) and New Hampshire-based Direct Capital, which made three claims totaling $62,727.25 in unsecured debt to go with an additional $18,000 in secured claims.

Grand Rapids-based First Community Bank was also listed as a creditor for $51,591, of which $48,000 was secured by an auto lien.

DIS Transportation reported $393,311 in total assets, which included $248,780 in machinery and equipment.

In 2018, DIS Transportation grossed nearly $8.5 million in revenue followed by $6.5 million in 2019. However, in 2020, up to the filing date, DIS Transportation had generated a little less than $1.4 million in revenue. 

The company is represented in the case by Grand Rapids-based law firm Chase Bylenga Hulst PLLC.

“DIS was a successful company there for a number of years and in 2018 the freight rates dropped substantially, which really impacted their ability to meet their overhead,” Steve Bylenga, partner at Chase Bylenga Hulst PLLC, told MiBiz. “They took affirmative actions over the last couple of years to try to mitigate any issues with it. 

“They brought in a consultant. They were able to reduce about two-thirds of their debt through downsizing and selling unnecessary assets and were trying to get it down to the point where they could meet their day-to-day demands and just weren’t able to do it in time, especially when COVID hit in the spring.”

The filing shows DIS Transportation whittled down its liabilities from $1.7 million in 2019 to just over $500,000 this year.

“The first question I ask my small business clients is what’s the exit strategy,” Bylenga said. “If the issue is you don’t have enough income, bankruptcy isn’t going to help you. If they say ‘Look, I need more time. There was an issue. That issue has been resolved. I need time.’ We can do that.”

Holding on

Bylenga is no stranger to Subchapter V cases. In April, he worked with Grand Rapids mainstay Purple East, a clothing and smoking accessories shop that was the first entity in the Western District of Michigan to have a bankruptcy plan confirmed under the Small Business Reorganization Act.

Bylenga said he expects more businesses to utilize Subchapter V, specifically manufacturing companies and businesses belonging to the hospitality industry, such as hotels, bed and breakfasts and restaurants.

As the pandemic drags on, Bylenga has also seen a pronounced uptick in bankruptcy inquiries.

“We are getting a substantial amount of inquiries right now — a lot of people have been holding on for the last six or seven months hoping to get through,” he said. “Most of those companies are saying we’re almost there, we’ll probably need to file in the near future. 

“That’s why I think you’re going to see a substantial uptick in filings probably in January through March. Traditionally, you don’t see many bankruptcies during the holiday season.”

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