How To File A Business Bankruptcy In New York

New York's bankruptcy laws allow a business to file bankruptcy under Chapters 7, 11 or 13. Chapter 7 requires the debtor to liquidate its non-exempt assets and distributes the proceeds to the creditors. Chapters 11 or 13 allow the debtor business to continue operations and maintain its assets after submitting a repayment plan. New York provides Chapter 7 exemptions for certain assets that can be used with supplemental federal exemptions.

Chapter 7

New York allows the following exemptions:

• real property up to $10,000;
• personal property such as clothing, books, furniture, pictures, church pews, and cooking utensils;
• in lieu of homestead, cash, the lesser of either $2500 or with annuity, an amount that totals $5000;
• health aids;
• motor vehicle up to $2,400;
• personal injury recoveries up to $7,500;
• wrongful death recoveries;
• under specific conditions, life insurance annuities or proceeds;
• disability or illness proceeds up to $400 per month;
• certain pension benefits;
• payments allotted for child or spousal support;
• public benefits;
• property of a business partnership;
• tools of trade; and
• 90% of earned but unpaid wages received within 60 days before filing.

A Chapter 7 filing will discharge most debts except student loans, taxes, civil and criminal fines. New York provides a means test to determine eligibility. The means test is based on the median income of the state. If the business debtor's income is above the geographical median, it may not be eligible under the bankruptcy code. If the debtor fails the means test, Chapter 13 is still available.

A trustee is appointed to administer the estate, conduct a creditors meeting, ensure that there is no fraud, eventually sell any non-exempt property and distribute the proceeds among the creditors.

Chapter 11

 A business that wants to reorganize in New York may do so under Chapter 11. In New York, a business debtor can:

• Pay its debt up to a six-year period;
• Depending on the corporate structure, reduce its unsecured tax to 10% of the claim;
• Reduce tax penalties on priority tax claims;
• Reject certain leases and contracts; and
• Sell assets subject to liens.

A small business seeking to file Chapter 11 must file all of its recent returns, income statements, cash flow statements and balance sheets; and submit operating reports showing projections. The debtor has a 180-day exclusive period to file a repayment plan. All books and records are subject to review by the trustee. The trustee's duties are similar to those of a Chapter 7 trustee.

Chapter 13

Like Chapter 11, Chapter 13 is a reorganization process which allows debt restructure and continued operations. To be eligible for Chapter 13, the debtor's secured debt must be no more than $1,010,650 and its unsecured debt no more than $336,900. Under the bankruptcy code, the debtor must have "regular income" that is sufficient enough to fund a repayment plan. If the court determines that the debtor does not have sufficient disposable income, a Chapter 13 bankruptcy will be denied.

Find an Attorney

If you need to reorganize an insolvent business, bankruptcy in New York provides you options under Chapters 11 and 13. New York also allows you to liquidate under Chapter 7. Talk with an attorney experienced with New York's bankruptcy laws to facilitate a smooth liquidation or reorganization.