Many businesses are struggling right now and owners may face choices they never thought they’d face. New York bankruptcy courts can provide a lifeline to a struggling business or a way out for a failing one.
How Is The Business Organized?
A business that is set up as a separate legal entity can file for either Chapter 7 (liquidation) or Chapter 11 (reorganization) in New York bankruptcy courts. This includes corporations, partnerships and limited liability companies. These organizational structures are designed to protect the owner’s personal assets from debts incurred by the business.
Many small businesses today are sole proprietorships and are really just extensions of the owner’s own finances. The very small or micro business where owners have not gone through incorporation process is very common. These types of businesses have the same choices as a corporation plus one more: Chapter 13. If the owner has regular income, say from a regular full-time job, debts can be restructured so they can be paid with the owner’s current income.
Liquidation or Reorganization?
United States and New York bankruptcy statutes have a number of rules that govern liquidation and reorganization. In many cases however, it is up to the owner and the creditors to determine which is the better choice.
In most cases, reorganization is the preferred option. It gives the business a chance to adjust to changing markets, restructure debt so it can be paid off without cutting off company cash flow, and emerge from adversity stronger than before. There are also cases when owners are better off simply selling off assets, paying what debts they can and moving on.
The hardest question an owner must consider is whether or not the business is worth saving. A business that has failed because there was no market for its products isn’t going to be able to create a market overnight. A business that collapses because its services are tied to an obsolete technology can’t turn back the clock and make the technology desirable again.
Consult With An Attorney
New York bankruptcy processes are complicated. Not only can it be confusing to determine which type of bankruptcy is best, but the implications of the filing, the details of the forms and court procedures, and much more can overwhelm the average business owner.
This is not a do-it-yourself task. A New York bankruptcy lawyer provides expert advice that will help an owner decide whether bankruptcy is the right choice for a struggling business. If bankruptcy is the best option, the attorney will guide the owner toward the best type of bankruptcy and handle the legal details to be sure the owner’s assets are protected to the extent the law allows.