What are the Benefits of Chapter 5 Bankruptcy in New York?

There are many different choices when it comes to bankruptcy in New York. Everyone has different circumstances and wishes, and bankruptcy reflects that. You might consider Chapter 5 bankruptcy if you are a small business. Do not hesitate to contact The Law Offices of Michael D. Pinsky, P.C. to learn more about how it works. Our experienced New York bankruptcy attorneys are dedicated to ensuring our clients make the best choices on behalf of themselves and their businesses.

What is Chapter 5 bankruptcy in New York?

Chapter 5 bankruptcy was added as a subchapter to Chapter 11 by The Small Business Reorganization Act. This chapter was created and is applicable only to small businesses. Meanwhile, Chapter 11 bankruptcy allows business reorganization and is more profitable to large corporations.

Contact our experienced bankruptcy firm today to learn more about Chapter 5 bankruptcy. Our firm is dedicated to ensuring that you and your small business’s future is protected.

What are the benefits of Chapter 5 bankruptcy?

A Chapter 5 bankruptcy is typically aimed at businesses that are recognized as “small business debtors.” This suggests that their total unsecured debts are under a certain threshold. Chapter 5 works to streamline the reorganization process in different ways. Some of the ways in which this is done include the following:

  • Debtor-in-possession rules will be followed, allowing a business owner to remain in possession of business assets while continuing to operate their business. But, rather than having the debtor serve as trustee, a trustee will be appointed. This individual will help in the reorganization process and distribute payments to creditors.
  • A committee of creditors will not be appointed unless the bankruptcy court believes there is an especially good reason to do so. This inevitably helps reduce costs for the debtor by eliminating the fees and expenses related to the professionals who serve on this committee.
  • The debtor will suggest a reorganization plan within 90 days of filing a petition for bankruptcy. It is essential to note that creditors will not be able to submit their own plans. The debtor’s plan will detail how debts will be paid over a period of three to five years.
  • Debtors will usually not be required to file a complete disclosure statement as they would be required to do in a Chapter 11 bankruptcy. Instead, the reorganization plan will cover some of the information that would be discussed in a disclosure statement.

If you are a small business owner, Chapter 5 bankruptcy may be the best choice for you. Contact our firm today if you have any questions or concerns about the process and learn more about how we can help you.


Michael D. Pinsky, P.C. represents clients in bankruptcy actions and related matters. Please call 845-394-2616 or contact the firm online to schedule a consultation.

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