Some businesses rely on a team of people working together to be successful, while others rely on the talent of one individual. When one person is responsible for making a business run the business can have a difficult time succeeding without that individual. In this competitive business environment, even the smallest challenges can spell trouble for New York businesses.
Recently a bathroom and kitchen design company in New York has file for bankruptcy after the death of its founder. The company's founder died last year. Following the man's death, the business had to close its doors. In the Chapter 7 bankruptcy petition, the business lists $221,000 in debts. Of these debts, one is a $50,000 secured debt to a bank, the other debt is unsecured. However, the company claims to only have $27,000 in assets to pay the debt.
Without its owner, it is unlikely the company has anyway to recover. Therefore, a Chapter 7 bankruptcy will liquated all of the company's assets in order to pay the creditors. Secured creditors will be paid first, and unsecured creditors will get any money that remains. Following the proceedings, any remaining debt will be discharged by the bankruptcy court.
If a business does not have cash flow, it can find that it cannot pay its debts and end up in a difficult financial situation. New York businesses should know that they have legal options available to them. While Chapter 7 will liquidate the business, a Chapter 11 bankruptcy can help the company created a repayment plan. With this plan in place businesses can negotiate contracts, and pay down debt in such a way that the business regains financial stability and can keep its doors open.
Source: Albany Business Review, "Kitchen designer files for bankruptcy," Adam Sichko, Feb. 4, 2014