New York businesses often have informal advance notice of a customer's plans to file a petition under either Chapter 7 or Chapter 11. In such cases, a creditor may attempt to persuade or coerce the debtor into paying off all or part of an existing or antecedent debt. These creditors may face an ugly surprise once the bankruptcy proceeding is underway: such payments may frequently be set aside as "voidable preferences" and the payment refunded to the bankruptcy trustee.
When a New York business faces bankruptcy, one of the first choices that must be made is whether to seek reorganization under Chapter 11 or dissolution under Chapter 7. Choosing Chapter 7 is essentially a choice to end the business's existence, whereas Chapter 11 reflects management's desire to continue the business with reorganized debts and perhaps additional capital. If a corporation chooses Chapter 11, management must decide which business relationships should be preserved and which should be ended.
Most New Yorkers who consider filing a bankruptcy petition must choose between filing under Chapter 7 or Chapter 13. Under Chapter 7, virtually all unpaid debts are discharged. But, under Chapter 13, the debtor must submit a plan to pay-off debts over time.
Most residents of Rockland understand that filing for bankruptcy is one way to manage an overwhelming amount of debt, but very few understand how that happens. One of the most important provisions of the United States Bankruptcy Code is the so-called "automatic stay." This post will explain the mechanics of the automatic stay and show how it can be used to manage all sorts of debts.