New York debt relief is a complicated topic. There is no perfect form of debt relief. Instead, there are many different types of debt relief, including both bankruptcy and non-bankruptcy remedies. Within the range of possibilities, not every type of debt relief will be appropriate for every situation. Choosing the best type of debt relief generally involves a consideration of the individual or entity seeking debt relief, as well as the debt situation itself. For example, businesses commonly take advantage of Chapter 11 bankruptcy when seeking debt relief, while individuals more commonly file under Chapter 7 or Chapter 13.
Chapter 11 bankruptcy primarily serves to aid distressed businesses by allowing the business to reorganize its debt. Instead of signaling the end of the company, Chapter 11 often allows a business to emerge from the bankruptcy financially stronger. In addition to reorganization of debt, however, Chapter 11 bankruptcy also provides a legal mechanism for liquidation of businesses. Even though Chapter 11 bankruptcies are more commonly filed by businesses, individuals are not prevented from filing for bankruptcy under Chapter 11. When an individual files under Chapter 11, he or she can also use the bankruptcy proceeding to restructure debts or liquidate property.
In order to begin the process of filing for Chapter 11, the business or individual must file a bankruptcy petition. Under Chapter 11, the debtor is characterized as a “debtor in possession,” which means that the debtor retains control and possession of all assets during the pendency of the bankruptcy proceedings. Businesses filing for Chapter 11 bankruptcy are allowed to continue to operate the business while the bankruptcy proceedings are ongoing.
One of the benefits of filing for bankruptcy under Chapter 11 is the automatic stay. After filing the bankruptcy petition, there is a period of time when creditors are prohibited from pursuing collection or payment on any debts or claims that preexisted the filing of the bankruptcy petition. In addition, the automatic stay results in the suspension of all judgments, foreclosures, repossessions and other collection activities. This automatic stay allows the debtor the time and space to attempt to negotiate and resolve some of the existing financial problems.
Source: AmericanBar.org, “Chapter 11 Bankruptcy: A Prime,” Christopher R. Kaup & J. Daryl Dorsey, 2011