Corporate Bankruptcy Laws in the State of New York

• In a "corporate bankruptcy," a company (instead of an individual) files for bankruptcy protection from debt. A corporate bankruptcy filing can include any chapter under the Bankruptcy Code (usually Chapter 7 or 11) that a company chooses to file. The choice of chapter filing will establish whether or not the company maintains its business. Depending upon the chapter it files, the corporation will either discharge (eliminate) qualifying debts entirely or be given the opportunity of repayment and restructuring its debts.

Before Filing

• The laws for bankruptcy are regulated by the federal government, but states have some freedom to decide exemptions and filing options. if you are filing for bankruptcy as a corporation or business, the U.S.bankruptcy courts of New York require that you file with an attorney. Though individuals must first go through credit counseling before filing for bankruptcy, the state does not require this of corporations.

  Your company's attorney will guide you through the bankruptcy process and help you to decide which chapter your company should file. A Chapter 7 filing means that your company goes out of business and its assets are sold to pay its creditors. In a Chapter 11 filing. your company will not go out of business, but you will need to create a plan of repayment to its creditors.

Petition

• New York state has four bankruptcy courts: New York Southern District Court, New York Northern District Court, New York Eastern District Court and the New York Western District Court. Your corporation must file for bankruptcy with the New York court that is closest to its main location. After you hire an attorney to guide your company through the bankruptcy processes and legal terms, she will help you to file a petition. With this petition, you must include schedules of your company's assets and liabilities, its locations, a schedule of profits and expenses, a schedule of executory contracts and unexpired leases and a statement of your company's financial affairs. For a Chapter 11 filing, you also must present your company's plan of debt repayment and a disclosure statement: a document that contains necessary information concerning its assets, liabilities and business affairs.

Fees

• To be able to file for bankruptcy, your company must pay some legal fees to the bankruptcy court in New York in which it is filing. As of 2010, for a Chapter 7 filing, your company must pay $245 as a case filing fee, $39 in miscellaneous administrative fees and $15 for trustee surcharges. For a Chapter 11 filing as of 2010, your company must pay a $1,000 case filing fee and a $39 miscellaneous administrative fee.

Discharge

• If the New York court accepts your petition, it will discharge your company's debts. In a Chapter 7 filing, your company will go out of business and all of its assets and property will be sold to pay creditors. Your company's secured creditors will be paid first, after which your stockholders will be paid. In a Chapter 11 filing, if your company's petition was accepted, the company will pay its creditors as explained in the repayment plan and the court will discharge its debts, letting the company start over again.