Are You Considering Filing for Bankruptcy for Your New York Business?
Businesses sometimes run into financial trouble because they are not bringing in enough income to support the expenditures. When a business has insurmountable debt and cannot find another way to raise capital or increase income, it may be best to file for bankruptcy. There are several different types of bankruptcies, and depending on how the business is organized, the business may have more than one option to choose from.
Chapter 11
Businesses can file for Chapter 11 bankruptcy if they wish to reorganize their debt and set a payment plan to repay all their creditors. This can be a good plan if the business expects to raise its revenue in the future and selling its current assets in another form of bankruptcy will result in bigger losses. After the initial filing, the business remains under the control of the owners. However, a trustee may be appointed if there is an allegation of management or fraud.
Chapter 11 bankruptcy presents some advantages to the business in that it can void existing contracts, including contracts with employees and suppliers. However, the business is also closely monitored during the bankruptcy process, and cannot make any moves, like selling off major assets, without court approval.
Chapter 7
Businesses can also file for Chapter 7 bankruptcy. This kind of bankruptcy allows the business to discharge its debts. Owners of sole proprietorships can file for Chapter 7 bankruptcy in order to discharge their personal debts along with those of the business. Generally, once a business files for Chapter 7 bankruptcy, the business cannot be operated anymore. Business assets that are deemed non-exempt are liquidated or sold to pay off creditors.
Chapter 13
For businesses that are organized in such a way that they are not a separate legal entity from the owner, the owner may file for Chapter 13 bankruptcy to eliminate debt. Business entities such as corporations cannot file for Chapter 13 bankruptcy. Like Chapter 11, this form of bankruptcy allows the person filing for bankruptcy to reorganize his debts and enter a repayment plan to pay off part or all of the debt.
For some businesses it may be better and possibly more affordable to restructure debts instead of filing for bankruptcy. Debt restructuring can be done through negotiating down the existing debt, for example by extending the time it will take to pay back the debt. In discussing the bankruptcy option with an attorney, debt restricting should be discussed as an option.
Contact a Hudson Valley Area Bankruptcy Attorney
If you are a business owner considering filing for bankruptcy for your business, it is important to consult with an experienced Rockland County business bankruptcy lawyer. There are different factors to be considered in choosing the right form of bankruptcy for your business and personal needs. For more information, contact Law Offices of Robert S. Lewis, P.C. at 845-358-7100 to schedule a free consultation and find out what options are the best for your situation.
Source:
http://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-11-bankruptcy-basics
