How to File Business Bankruptcy in NY
If your business is struggling with limited income and excess liability, you may need to file for business bankruptcy. Picking the right form of bankruptcy and going through the bankruptcy process can be complex and labor-intensive, but it may be the thing that saves your business or personal finances. Read on for an explanation of business bankruptcy and how to file in New York. If your business is struggling with debt, call a knowledgeable Poughkeepsie bankruptcy lawyer to explore your options for debt relief.
Choosing the Right Type of Bankruptcy
If you have reached the point where bankruptcy is on the table, you will first need to decide which form of bankruptcy to file. The type of bankruptcy available to you depends upon the structure of your business: Chapter 7 involves liquidating assets to repay debts; Chapter 11 involves reorganizing a business, its liabilities, and its assets in order to repay debts and keep the business going; Chapter 13 involves restructuring individual debts and establishing a plan to repay owed debt over a set period of time. A sole proprietorship can file under Chapter 7, Chapter 11, or Chapter 13. Corporations, partnerships, and limited liability companies cannot file for Chapter 13 and thus must choose between Chapter 7 and Chapter 11.
The decision between Chapter 7 and Chapter 11 generally turns on whether you are trying to salvage the business. If you are unsure of what caused the business to reach the point of bankruptcy, or if you have decided that the problems with the business cannot be fixed, then Chapter 7 liquidation might be appropriate. Problems such as a lack of market base, the presence of a “big box category killer” in your area that you cannot compete with, or new developments in the industry that would require complete rehiring of your workforce or complete retraining of your employees to continue, are generally too difficult to solve via Chapter 11 reorganization. Chapter 7 liquidation effectively ends the business.
Chapter 11 reorganization, on the other hand, is bankruptcy for businesses that intend to continue. Chapter 11 requires the debtor to be receiving regular business income. Chapter 11 allows a business to establish new, affordable contract terms between the business and creditors, including extended payment terms on real property mortgages or equipment loans. The parties may agree to reduce the overall amount due, discharging the excess debt at the time of plan confirmation rather than at the end of the plan process.
For qualifying individuals and sole proprietorships, Chapter 13 offers additional advantages. It is cheaper and easier to file than Chapter 11, the plan approval process is faster, more debt types are covered, and the time for the repayment plan is limited. Talk to your bankruptcy attorney to discuss which form of bankruptcy is best for your business.
Once you have chosen your form of bankruptcy, your business will need to prepare and file a bankruptcy petition. We strongly recommend retaining a knowledgeable business bankruptcy lawyer to help with the process. The required disclosures are significant, the forms can be confusing and complex, and the more experienced your attorney, the more of your assets you can protect and liabilities you can limit or eliminate.
You’ll need to prepare and file a bankruptcy petition in the appropriate federal bankruptcy court. You will need to fill out additional forms that differ depending on the type of bankruptcy, such as a reorganization plan that explains how you will pay back your creditors over the repayment period and details about your assets, liabilities, and business affairs.
You will then go through the court processes and confirmation hearings, at which your creditors can object to your proposed plan. If your plan is approved, you will continue to operate your business while a trustee oversees the plan repayment process. The process differs if you have elected to file under Chapter 7, in which case a trustee would take possession of business assets to liquidate in order to repay creditors. Make sure you have a seasoned bankruptcy attorney representing your interests every step of the way to ensure that you get the best bargain out of the process, protecting your finances, your business, and your livelihood.
If you are struggling with debt in New York, contact the seasoned and savvy Hudson Valley bankruptcy lawyers at the Law Office of Taran M. Provost, PLLC for a free consultation on your case at 845-675-3243.