Bankruptcy During COVID-19
The COVID-19 (novel coronavirus) outbreak has required aggressive action to slow the spread of infection in New York. These public safety measures have forced thousands of businesses across New York to close or reduce in-person services, resulting in financial hardships for business owners and their employees. If your business is suffering or if you are overwhelmed by debt, a New York bankruptcy lawyer can help you explore your options. At Benjamin Hart, P.C., we can review your situation to identify the potential benefits of filing for bankruptcy during COVID-19 under Chapter 7, Chapter 11, or Chapter 13, as well as possible alternatives. We are familiar with the procedural adjustments necessitated by the ongoing crisis and can make sure that the process unfolds as smoothly as possible under the circumstances.Bankruptcy During COVID-19
As social distancing measures continue, the losses will continue to mount for small businesses and unemployed individuals. Bankruptcy filings are expected to increase over the coming weeks and months, and securing legal advice now may be advantageous for people who are considering bankruptcy protection. Generally, individual debtors may file for bankruptcy protection under Chapter 7 or Chapter 13, depending on their financial situation. A Chapter 7 bankruptcy will eliminate most debts, but it requires the liquidation of non-exempt assets to pay creditors. Under Chapter 13, individuals may keep their assets if they pay a portion of their debts over a plan lasting three to five years. Alternatives to bankruptcy may include out-of-court agreements with creditors or debt counseling services.
A business may file for bankruptcy under Chapter 7 to liquidate or under Chapter 11 to reorganize. In a Chapter 7 bankruptcy, the business stops operating. A bankruptcy trustee is appointed to liquidate the assets and use the proceeds to pay creditors in accordance with the Bankruptcy Code. A Chapter 11 bankruptcy allows a business to continue operating while it reorganizes its finances to become profitable again. Prolonged closures amid the pandemic, however, could make the process more complicated for companies that are unable to generate revenue. Bankruptcy under Chapter 13 is also an option for individually owned and operated businesses, but it is not available for LLCs, partnerships, or corporations.Procedural Issues Caused by COVID-19
In the New York City area, the U.S. Bankruptcy Courts for the Southern and Eastern Districts of New York handle bankruptcy cases from five separate courthouses. To protect the public during the COVID-19 pandemic, the U.S. Bankruptcy Courts have restricted access to the New York City courthouse buildings, allowing only employees and certain other individuals to enter. In addition, the courts have effectively suspended all in-person appearances in bankruptcy cases, and they are conducting all hearings and conferences telephonically. To accommodate these changes, many scheduled bankruptcy hearings have been postponed or set at later dates, causing delays.
Although in-person services have been reduced, essential court proceedings and bankruptcy filings are still taking place. The courts are encouraging parties to file bankruptcy petitions and other documents electronically, but they will accept paper filings that are mailed or dropped off in a sealed envelope. As the COVID-19 crisis continues, court operations are subject to change, and individual judges’ procedures may vary. A local attorney can provide up-to-date information on your bankruptcy proceedings and navigate you through the procedures that are currently in effect.
Certain rules of bankruptcy procedure also have been amended during this time. For example, the U.S. Bankruptcy Court for the Eastern District of New York has amended Interim Rule 1020 pursuant to the federal Coronavirus Aid, Relief, and Economic Security (CARES) Act. This rule was originally adopted to help implement the provisions of the Small Business Reorganization Act of 2019. It applies to small business debtors and to debtors who are filing under Subchapter V of Chapter 11. The amendment to Interim Rule 1020 alters the definition of “debtor” and affects who may be eligible to file under Subchapter V. The amended version of the rule will remain in effect for one year after the enactment of the CARES Act.Discuss Your Options with a Skilled Bankruptcy Lawyer
During this challenging period, many individuals and businesses in New York need the legal advice of a bankruptcy attorney more than ever. At Benjamin Hart, P.C., we can help you take steps to ensure that you get the necessary relief through bankruptcy during COVID-19. We serve clients in the Bronx, Brooklyn, Manhattan, Queens, Staten Island, and the surrounding areas. Request a free initial phone consultation by calling (212) 835-1532 or submitting our contact form online.