Keeping or Closing a Business: Queens Bankruptcy Attorney Bruce Feinstein Esq. Works with Struggling Store Owners

Share Article

Mr. Feinstein discusses factors to consider when determining the fate of a business, and the different uses for Chapter 7, Chapter 11, and Chapter 13 bankruptcy, at the start of a new year.

Queens Bankruptcy Attorney Bruce Feinstein, Esq.

Queens Bankruptcy Attorney Bruce Feinstein, Esq.

There are several bankruptcy options for businesses in New York that are trying to stay open depending on the structure of the business and its debt to asset ratio.

The New Year often brings with it a slew of bankruptcies from business that were too weak to survive the holidays sales period. A Forbes article from January 6, 2015, explains how businesses often try to use holiday sales as a boost, but are unable to do so. It says, “Every year, there are retailers struggling with inadequate cash flow and strained liquidity due to poor sales and poorer profits, [who] hope that by some stroke of luck, they will pull themselves out of their financial morass as a result of strong Christmas sales.”

Starting off a new year often means making changes, so some businesses are left with the conundrum of closing their doors or continuing operations. Bruce Feinstein, Esq., a Queens bankruptcy lawyer, has begun this year, as he does each new year, by working with New York businesses to determine which type of bankruptcy is the best choice, and whether staying open or shutting down is the best option. He discusses factors to consider when determining the fate of a business, and the different uses for Chapter 7, Chapter 11, and Chapter 13 bankruptcy.

One deciding factor is the profitability of the business. Some businesses may be experiencing a slow period due to weather or short-term economic factors. If this is the case and the business has more assets than liabilities, such as debts to creditors, it may be best to continue operations and try to move past this rough patch. But if the business is consistently losing money and experiencing poor cash flow, bankruptcy is an option to consider. Mr. Feinstein says, “Companies burdened by debt may be unable to meet payroll or pay vendors, starting a downward spiral that can destroy a company.”

Business owners should also consider who is liable for business debts before filing for bankruptcy. If the debts are tied to the owner by a personal guarantee, he or she may actually benefit from keeping the business open and negotiating with creditors. This can keep creditors from going after personal assets if the business closes. Even in this case, it is helpful to work with an attorney with experience in debt negotiations and business bankruptcy.

For those who wish to keep a business open, there are viable bankruptcy options. Chapter 7 bankruptcy can help an owner who is the sole proprietor of the business. A personal Chapter 7 bankruptcy can remove both personal and business debts while protecting and keeping the business operating. Mr. Feinstein adds, “An experienced bankruptcy attorney can utilize either Federal or New York State exemptions to protect an individual’s assets during Chapter 7 bankruptcy. This means that clients are often able to keep their homes, their cars, their personal belongings, and other exempt property that an aggressive Trustee might otherwise pursue."

If the business has too many non-exempt assets, with no hope of reorganizing under a Chapter 11 bankruptcy (see below), then the owner may decide to file a Chapter 7 bankruptcy in order to liquidate the business. Under this form of bankruptcy, the assets of the business might be sold to pay creditors by an appointed bankruptcy Trustee to pay off debts.

Under certain circumstances, the best choice for a struggling business owner is a Chapter 13 bankruptcy. This form of bankruptcy can be filed by individuals and sole proprietors of a business, who can then include personal and business debts while continuing to run the business. Mr. Feinstein says, “This type of bankruptcy relief is beneficial to sole proprietors who have a great deal of personal, non-business, nonexempt assets. Chapter 13 bankruptcy is designed to let the owner keep his or her assets while creating a court-approved payment plan. This also allows them to avoid paying interest over long periods of time while paying off their debt, often at just a small percentage of the total amount owed."

Chapter 11 bankruptcy is an option for businesses that are corporations or partnerships, and not sole proprietorships. This business bankruptcy lets the business reorganize its debts while continuing to operate. Mr. Feinstein explains, “During the process, the debtor can operate as a ‘debtor in possession,’ which means that he or she acts as a trustee of the business and remains in control of its operations. The debtor can work towards becoming profitable again while undergoing financial restructuring and repaying debt. Restructuring may include accepting loans from new lenders or canceling unfavorable contracts.”

There are several bankruptcy options for businesses in New York that are trying to stay open depending on the structure of the business and its debt to asset ratio. Working with a bankruptcy lawyer in New York allows a business to find the best kind of bankruptcy relief, or the most effective alternatives.

The Law Offices of Bruce Feinstein, Esq. has nearly two decades of experience in bankruptcy law, helping clients and families resolve their issues and move forward with their lives. Visit feinsteinbankruptcylaw.com for more information or call (718) 514-9770 to reach the New York office.
###

Share article on socal media or email:

View article via:

Pdf Print

Contact Author

Bruce Feinstein
@Bruce_Feinstein
since: 02/2012
Follow >
The Law Offices of Bruce Feinstein, Esq., P.C.
since: 02/2012
Like >