What You Should Know About Chapter 5 Bankruptcy in New York

It is important to understand what Chapter 5 bankruptcy applies to. Continue reading and reach out to our firm today to discuss the details of your situation and determine what the best course of action for you is. Our experienced Newburgh bankruptcy lawyers are here for you and will prioritize you.

How does New York define Chapter 5 bankruptcy in New York?

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

To learn more about Chapter 5 bankruptcy, continue reading and reach out to our firm today. Our skilled attorneys can help ensure that you are making the right choices.

What are the advantages of Chapter 5 bankruptcy?

It is important to recognize that Chapter 5 bankruptcy is generally aimed at businesses that are identified as “small business debtors.” This means that their entire unsecured debts are under a specific threshold. Chapter 5 works to facilitate the reorganization process in many ways. Some of the methods in which this is accomplished 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. Though, rather than having the debtor serve as trustee, a trustee will be assigned. This individual will help in the reorganization process and distribute payments to creditors.
  • A committee of creditors will not be established unless the bankruptcy court thinks there is a particularly 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 propose 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 typically 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.

Chapter 5 bankruptcy may be the best choice for you if you are a small business owner. Do not wait to reach out to our firm today if you have any questions or concerns about this process. Our Newburgh bankruptcy lawyers are on your side and are here to help. We are just one call away.


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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