Queens Divorce Attorney Bruce Feinstein, Esq. Discusses Small Business Bankruptcy in New York
Queens, NY (PRWEB) June 13, 2014 -- People who are struggling with a business may consider filing for bankruptcy in order to repay or restructure debt. However, there are several options available, and it’s important for individuals to find the kind of bankruptcy that best suits their situation. Bruce Feinstein, Esq., a bankruptcy attorney in New York, discusses these options so that business owners can find the best choice.
The bankruptcy options for a small business owner include Chapter 7, Chapter 11, and Chapter 13 bankruptcy. “During Chapter 7 bankruptcy, an appointed trustee sells a debtor’s non-exempt assets using a liquidation process,” explains Mr. Feinstein. “All proceeds from that process are used to pay creditors. In turn, the individual’s debt is either eliminated or drastically reduced.”
Chapter 11 bankruptcy is a form of reorganization often utilized by businesses, though it is sometimes used by individuals who qualify. It can also be called “corporate bankruptcy” or “reorganization bankruptcy.” This option is appropriate for businesses with a significant amount of debt and assets.
Chapter 13 is a common form of bankruptcy that allows an individual in debt to maintain ownership of assets while paying creditors over time. It is a good choice for those who are ready and able to repay their debt with the help of a court-approved plan.
Each of these types of bankruptcy has certain requirements that differentiate them and make them more beneficial to small business owners depending on what type – or how much – debt they have. One key point to consider is how a person’s business is organized, as this will affect which type of bankruptcy to choose. If someone’s business is organized as a sole proprietorship, then it is associated with that person. In this case, a business bankruptcy may end up negatively affecting personal assets and credit. Filing for a personal bankruptcy and including business debts can lessen this burden. When the business is legally considered separate from the owner, like a limited liability company, Chapter 11 bankruptcy may be the better choice.
Another point for business owners to consider is whether or not they can repay their debts over time. For those who can demonstrate that they will be able pay off debt, Chapter 13 bankruptcy is a strong option. An owner will need to prove to the court that he or she has sufficient income to repay these debts. But if an owner does not have the ability to pay off debts to creditors, there is also the option of Chapter 7 bankruptcy. The owner will need to prove that he or she is unable to make payments to creditors by taking a means test, and certain non-exempt assets may be sold in order to pay these debts.
Business owners should also know which debts are considered non-dischargable on a small business bankruptcy. For example, sales tax and payroll tax are not considered dischargeable. Mr. Feinstein adds, “owners who choose Chapter 7 bankruptcy will be able to sell certain assets through an appointed trustee to pay off priority debts like taxes.”
Many business owners ask whether or not it is a good idea to close down a business if they decide to file for bankruptcy. This often depends on whether or not the business is still profitable, since new debt incurred after filing for bankruptcy cannot be discharged. “Owners need to step away from the emotional connection they have with their business and decide whether or not it makes financial sense to keep their doors open,” says Mr. Feinstein.
There are many tough questions that small business owners must ask themselves if they decide to file for bankruptcy. But bankruptcy is still a way for people to get out of debt and jumpstart their lives rather than rack up more debt. It is important to work with a bankruptcy attorney in New York who can gather the information needed in order for owners to make the best decisions for their businesses, and themselves.
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 http://www.bfeinsteinesq.com for more information or call (718) 514-9770 to reach the New York office.
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Bruce Feinstein, The Law Offices of Bruce Feinstein, Esq., PC, http://www.bfeinsteinesq.com, +1 (718) 514-9770, [email protected]
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