Business Bankruptcy in New York

A struggling business has more options than its owners often realize. Bankruptcy and non-bankruptcy restructuring tools can salvage going-concern value, eliminate burdensome leases and contracts, restructure secured debt, and protect the owners' personal exposure on guarantees. We represent New York small and mid-sized businesses across the spectrum of restructuring work.

The Strategic Choice

Every business restructuring engagement begins with the same question: is there a business worth saving? If the answer is yes — the underlying operations are profitable, the cost structure can be rationalized, and the secured debt can be brought to fair value — then the goal is reorganization through Chapter 11 or Subchapter V. If the answer is no, the goal shifts to an orderly wind-down that maximizes recovery to creditors, protects the owners' personal balance sheets, and avoids fraudulent-transfer exposure.

Pre-bankruptcy alternatives to consider:

• Article 9 sale. A secured lender forecloses on substantially all assets and sells them to a new entity, often the owner's preferred buyer. Fast and cheap when the secured lender cooperates.
• Assignment for the benefit of creditors (ABC). A state-law alternative to Chapter 7 in which a fiduciary assignee marshals and distributes the business's assets to creditors.
• Out-of-court workout. Direct negotiation with lenders, landlords, and large vendors to restructure debt without a bankruptcy filing.
• Receivership. A New York state court receiver appointed to operate or wind down the business.

Reorganization Tools

If reorganization is the chosen path:

• Subchapter V Chapter 11. The right vehicle for most small businesses with debts under the Subchapter V cap.
• Traditional Chapter 11. Used when DIP financing, a 363 sale, or cramdown of large secured claims is required.
• Section 363 sale. A bankruptcy court-approved sale of the business as a going concern, free and clear of liens and successor liability.
• Lease and contract restructuring. Rejection of unprofitable leases under section 365, with rejection damages capped by statute. Cure and assumption of valuable contracts.

Liquidation Tools

If reorganization is not realistic:

• Chapter 7. An entity Chapter 7 transfers everything to a trustee and brings the operation to a definitive end. No discharge is needed because an entity does not need one.
• Chapter 11 plan of liquidation. Sometimes preferable to entity Chapter 7 when there is a structured sale process to run, executory contracts to assume and assign, or litigation claims to pursue post-confirmation.
• Wind-down without filing. An orderly closure that pays creditors in priority order, completes final tax filings, and dissolves the entity.

Protecting the Owners

Most small business owners have personally guaranteed at least some of the business's debt — the SBA loan, the landlord, the equipment lessor, and often unsecured trade lines. A business bankruptcy filing does not discharge personal guarantees. We coordinate the business restructuring with the owners' personal financial planning — sometimes including a follow-on personal Chapter 7 or Chapter 13 to deal with guarantee exposure.

Issues we address before the business files:

• Fraudulent-transfer exposure. Transfers to owners or insiders in the year (or longer) before filing must be analyzed carefully.
• Preferences. Payments to insiders within one year of filing, and to non-insiders within 90 days, are potentially recoverable by a trustee.
• Personal guarantees and pledges. Identification of every personal guarantee and the strategy for each.
• Trust fund taxes. Sales tax and payroll trust fund taxes are non-dischargeable personal liability for responsible persons. They must be addressed.
• Successor liability. Structuring an acquisition vehicle to avoid successor liability for the predecessor's debts and obligations.

Industries We Have Represented

• Restaurants and hospitality.
• Retail.
• Real estate holding companies.
• Professional service firms.
• Construction and contracting.
• Trucking and logistics.
• Manufacturing.
• E-commerce and online businesses.

To discuss your business's situation in confidence, call 212-233-1233. Early engagement — ideally before a default is declared, a judgment is entered, or a foreclosure sale is scheduled — gives us the most options.