Under today’s current circumstances, many businesses are facing financial hardship. Struggling financially is an incredibly stressful situation, but it is important to know that there are various options to which you can turn. One option may be to file for Chapter 11 bankruptcy. Read on to learn more about Chapter 11 bankruptcy in New York and what the process entails.
What is Chapter 11 Bankruptcy?
Under Chapter 11 Bankruptcy, a business owner will work with his or her attorney to come up with a Reorganization Plan. With a Reorganization Plan, a business remains open and continues to operate. Any profit generated is used to pay operating expenses first, and then pay off a portion of the debt and eliminate the balance.
Who Qualifies for Chapter 11 Bankruptcy?
In New York State, if you have more than $419,275 in unsecured debt and $1,257,850 in secured debt, there is a good chance that you will qualify for Chapter 11 bankruptcy. Regardless, it is important to speak with a skilled bankruptcy attorney to discuss all potential options when it comes to your unique situation.
Chapter 11 Bankruptcy Process
If Chapter 11 is the right move for you, your attorney will file a Bankruptcy Petition. This will include a financial statement, a list of assets, a list of liabilities, and a statement of any outstanding contracts or leases. After your Bankruptcy Petition is filed, the following steps of the process will begin:
- Automatic Stay.
- The Automatic Stay prohibits creditors and debt collectors from pursuing your debts. They are not allowed to contact your business. This allows you to have the space and privacy needed to reorganize your debt.
- The “Reorganization Plan”
- You and your attorney will develop a Chapter 11 “Reorganization Plan.” Usually, this Plan will restructure debt, cancel burdensome contracts, and reduce overhead.
- Meeting of creditors
- Soon after the filing of the Bankruptcy Petition, the largest creditors will have an opportunity to meet with the attorney and business owner to get a clear picture of the business’s Reorganization Plan.
- Getting the Plan approved
- The Reorganization Plan must be approved by the New York Bankruptcy court, and then voted on by the largest creditors. The Bankruptcy Court will approve the Plan if it is in the best interests of both the business and the creditors. Additionally, the Plan will have to meet the legal standard of the “Liquidation Analysis.”
- Liquidation Analysis refers to whether the creditors are receiving a better, albeit minimal payment of their debt, as opposed to the company going out of business and the creditors receiving $0.00.
- The Reorganization Plan must be approved by the New York Bankruptcy court, and then voted on by the largest creditors. The Bankruptcy Court will approve the Plan if it is in the best interests of both the business and the creditors. Additionally, the Plan will have to meet the legal standard of the “Liquidation Analysis.”
If you are considering filing for bankruptcy, contact our firm today to speak with an experienced attorney.
CONTACT A BANKRUPTCY LAWYER TO DISCUSS YOUR DEBT OR COLLECTION ISSUE
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.
