BusinessBook an appointment
Who Are Bankruptcy Attorneys in New Jersey?
Every day, entrepreneurs have to work hard to ensure that their business succeeds. However, sometimes things go differently than planned. Even when you think you are ahead of your game, external factors can arise, causing your business to incur significant debt.
While some business debts are necessary for profit, heavy debts can jeopardize your business’s future and even the well-being of your family and loved ones. In such cases, when the financial trouble of your debts becomes insurmountable, you, as the business owner, might consider a business bankruptcy.
Filling for bankruptcy allows you to secure your business assets and avoid foreclosure in some cases. Since the laws surrounding business bankruptcy and bankruptcy protection can be complicated, you may need to retain the services of New Jersey bankruptcy lawyers.
A New Jersey business bankruptcy lawyer is an attorney who assists clients in utilizing the court system to reduce or eliminate debts and apply for bankruptcy. The Law Offices of Scott J. Goldstein, LLC, can explain the different types of bankruptcy cases available for businesses and guide you through the process if you need to file bankruptcy relief.
How Does New Jersey Business Bankruptcy Work?
Filing for bankruptcy in New Jersey is comparable to filing in other states in most respects. The bankruptcy process in New Jersey is governed by federal bankruptcy law, not New Jersey state law, and it operates by dissolving the contracts between businesses and their creditors. This process essentially provides these companies with a fresh start.
In most cases, large and small businesses in New Jersey can file for business bankruptcy voluntarily. However, creditors can sometimes force companies into bankruptcy.
Once the bankruptcy case is filed, the bankruptcy court will appoint a trustee to supervise the case. The trustee is responsible for distributing non-exempt assets to creditors or selling them and distributing the proceeds to creditors.
Types of Bankruptcy
Choosing the bankruptcy chapter that is ideal for your circumstances can be challenging. You may need the services of a business bankruptcy attorney to understand your options.
That said, New Jersey businesses can file for business bankruptcies in three forms.
Chapter 7 Business Bankruptcy
A Chapter 7 bankruptcy is a process under bankruptcy law where a company can settle debts through liquidation.
Once a Chapter 7 bankruptcy is filed and approved, the bankruptcy court will order an automatic stay, closing the business. This automatic stay automatically suspends any cases in court, stops repossession and foreclosure proceedings, as well as harassing calls and letters.
The trustee will oversee the company’s dissolution and creditor payments, ensuring they are made correctly and removing the possibility of an officer-pays-debtor claim. This is one benefit of filing under Chapter 7. Additionally, it informs the creditors that there are no longer any assets, making any subsequent legal actions useless.
Filling New Jersey Business Bankruptcy Under Chapter 11
A Chapter 11 bankruptcy is also called a reorganization bankruptcy. The purpose of Chapter 11 is to restore financial stability to the company by restructuring its costs and debts, typically leading to a considerable debt reduction.
The rationale underlying Chapter 11 is that it is preferable for a company to survive than to go out of business. Like Chapter 7, when a Chapter 11 petition is filed, the bankruptcy court issues an automatic stay that halts all collection and legal actions brought by the company’s creditors.
In a Chapter 11 case, the company negotiates a new repayment plan with its creditors to repay debts while continuing with business as usual. During the Chapter 11 case, creditors cannot sue the corporation or seize assets without the court’s permission. However, until the matter is resolved, the business is prohibited from making certain financial decisions without obtaining court clearance.
A firm filing a Chapter 11 bankruptcy case in New Jersey is required to submit a disclosure statement and a reorganization plan in addition to the Chapter 11 bankruptcy petition and schedules. The disclosure statement gives an overview of the company’s background, financial situation, and operations to creditors and other parties with interest. This statement aims to persuade creditors to support the company’s plan of reorganization.
The plan of reorganization outlines the company’s strategy for restructuring its corporate debt. Creditors are typically grouped according to the type of debt, by whether they are secured debts, priority unsecured debts, or general unsecured debts. Based on this classification, creditors are allocated different priority levels under the plan.
Some creditors might be paid in whole for their business debts, while others might only get a portion of what the company owes them. Sometimes, a business might relinquish the collateral to a secured creditor or bargain for different loan terms.
Chapter 11 bankruptcy is the trickiest and most expensive process of all three. This is because, unlike other types, this type is up for a vote and can be rejectable by creditors.
Intense talks may be necessary to get a New Jersey Chapter 11 bankruptcy plan approved by the court and your creditors. Once the Chapter 11 Plan of Reorganization is approved, the company can continue business as usual without seeking court approval for any financial decisions.
Chapter 13 Bankruptcy for New Jersey Business Owners
Also called the Employees or income earners plan, a Chapter 13 bankruptcy helps those with a steady income to create a strategy for paying off all or a portion of their debts. Following this chapter, debtors offer a repayment strategy that involves paying creditors in installments over a short time (three to five years)
A self-employed debtor can file a Chapter 13 business bankruptcy. However, corporations and partnerships cannot file for bankruptcy under Chapter 13. If a corporation wants to restructure while keeping its doors open, it may consider filing under Chapter 11.
You give a Chapter 13 trustee a monthly payment, and the trustee uses that sum to pay creditors following the conditions of your approved Chapter 13 plan. Any remaining unsecured debts left over after your Chapter 13 case are dismissed. Once a bankruptcy discharge has been issued, creditors cannot pursue dismissed debts.
However, once you apply for Chapter 13 relief, you can only take on new debts with the court’s permission. As a result, while involved in a Chapter 13 case, you cannot use credit cards or apply for new lines of credit for your business.
Why You Need to Hire an Attorney
Before submitting any business bankruptcy case, it is important that you speak with a New Jersey business bankruptcy attorney to know your best option. While filing for bankruptcy may protect you and your business, filling the wrong type can have adverse effects in certain circumstances.
For instance, if, as a business owner, you file for a Chapter 7 and you fail to repay personally guaranteed commercial debts, you will still be held personally responsible. So even after liquidating your business, you will still need money to pay off those liabilities.
Therefore, if you guarantee any corporate debt, you may accumulate significant personal debt, and your assets could be jeopardized. In such a scenario, you may need a New Jersey bankruptcy attorney to show you the options and the right course of action for eliminating business debts while preserving your assets.
Similarly, if your Chapter 11 bankruptcy petition is rejected, your company’s reorganization plan can be converted into a Chapter 7 liquidation. Interested parties can do this on the following grounds:
- The business’s inability to ever succeed
- The failure to submit required reports or show up at a meeting of creditors
- A flagrant mismanagement
That means, instead of restoring your company’s finances, the company might stop existing.
In addition, the Disclosure Statement and a Chapter 11 Plan of Reorganization are complicated documents; debtors-in-possession should also file ongoing operating reports every month until the case is resolved.
Chapter 11 cases may also involve examiners, needless transfers, moves for cash collateral, litigation, motions for appropriate protection, motions for securing operating capital, motions to amend the automatic stay, and adversarial processes.
All these could be complicated if you are not a lawyer. But when you hire professional New Jersey business bankruptcy attorneys, the likelihood of successfully finishing a Chapter 11 corporate bankruptcy case might be increased.
Contact the Law Offices of Scott J. Goldstein, L.L.C.
If you are a business owner struggling with business debts, consider speaking with a bankruptcy lawyer to review your alternatives for filing a business bankruptcy petition. New Jersey business bankruptcy attorneys from Law Offices of Scott J. Goldstein, L.L.C. can assist clients in finding economical, practical solutions to save their business in New Jersey.
Reach out for a consultation today.