Like everywhere else, starting or running a small business on Long Island is always a financially risky endeavor.
Smaller operations are often more sensitive to swings in the legal environment, the economy or the local market. Even some slight changes can turn a profitable business into a distressed operation.
Many families in Brooklyn and the other boroughs of New York City put a lot of time and energy into their businesses and want them to survive financial headwinds.
Moreover, businesses owners often have personal liability for their business’s debts, meaning that if their business fails, their own finances fail as well.
When a business is in trouble, a Chapter 11 bankruptcy for small businesses is one option many organizations should consider.
However, this route may not always be the best option for a business. Sometimes, it is better just to negotiate with creditors directly if the goal is to keep the business running.
Of course, the weakness to negotiating is that creditors usually have the leverage to draw a hard line in their negotiations. They do not have to reach a deal with a distressed business.
In some cases, a Chapter 13 bankruptcy might be the best option
Depending on how a business is organized, the owners may consider filing a Chapter 13 bankruptcy in order to keep their enterprise afloat.
For example, if their business is a sole proprietorship, they can roll all their personal debts and business debts into a payment plan.
If they can get the plan approved and can complete it, they might be able to catch up on their business’s financial obligations, thus getting the business out of default. While the bankruptcy is ongoing, the automatic stay will protect a business from creditors.
Businesses that are facing hard financial circumstances have legal alternatives that they should make sure they understand.