Business Bankruptcy AttorneyStrategic Representation When You Need It
New Jersey Business Bankruptcy Attorney
Is your business facing challenges? Unsure how to cope with reduced volume or negative cash flow? Has your business been hurt by the Covid-19 crisis? Does your business have too much debt? Is your business dealing with creditor issues? Is your business behind in paying rent? Do you need to speak with a Chapter 11 attorney? We can help.
Jay L. Silverberg is a seasoned business New Jersey bankruptcy lawyer. He started practicing in the bankruptcy field over thirty years ago. We have represented virtually every type of party in interest in connection with a multitude of Chapter 11 bankruptcy cases, out of court restructurings, compositions, assignments for the benefit of creditors and workouts. Although he has handled cases of every size, including very large “mega-cases”, Jay presently focuses on small business bankruptcy and lower middle market businesses facing distress.
The Covid-19 pandemic is creating extreme challenges to many businesses in nearly every industry. Our bankruptcy attorneys can guide you in facing those challenges. Having an experienced bankruptcy lawyer is essential to assist you in learning your legal options. A skilled bankruptcy attorney can maximize the chances of the business surviving. Even if the business cannot be saved, good advice can help the business make a soft landing with the least negative impact upon creditors, owners, employees, counterparties to contracts and other interested parties.
Government programs alone are not going to save the day. While a PPP loan may go a long way toward preserving a business and restoring lost capital if the loan is forgiven, most businesses require more than that to survive in our vastly changed business landscape. We work closely with you and crisis managers and other professionals (as appropriate) to help your business emerge from this dark time as a strong viable entity.
Filing a bankruptcy petition is only one of many options available to troubled businesses. In many cases, a formal bankruptcy filing under Chapter 11 of the United States Bankruptcy Code is the perfect response. In some cases, it just is not the best strategy. We will work closely with you in making the right strategic decisions. Below is a very brief summary of some of the alternatives available to troubled businesses.
Filing a Bankruptcy Petition
Chapter 11 is a complex, time consuming and expensive process. However, it offers powerful protections and rights to a troubled business to allow the Debtor to reorganize its business affairs and endeavor to emerge as a viable business. The debtor in a Chapter 11 bankruptcy case is referred to as a debtor-in-position because the business maintains control over the daily operations. In most cases, a trustee is not appointed to represent the bankruptcy estate.
A business may voluntarily commence a formal bankruptcy filing by filing a petition in federal bankruptcy court. In New Jersey there are three United States Bankruptcy Courts, in Newark, Trenton and Camden. The petition should be filed in the court which serves the geographic area (called a “vicenage”) in which the debtor has its principal place of business. http://www.njb.uscourts.gov/content/where-should-petition-be-filed-0#:~:text=The%20petition%20and%20all%20documents,its%20principal%20place%20of%20business.
Filing a petition automatically stops all actions to collect pre-bankruptcy debts and enforce prepetiton obligations. It provides a safe haven to reorganize the financial affairs and operations of the business. This is called the “automatic stay”. A creditor that disregards the automatic stay may be held to be in contempt of court and may face sanctions.
During the pendency of the case, the Debtor is under the supervision of one assigned bankruptcy judge. One or more committees may be appointed to represent constituencies such as unsecured creditors, bond holders or other groups of creditors or equity holders of particular classes. Each such committee is permitted to retain its own professionals at the expense of the bankruptcy estate.
The United States Bankruptcy Code affords a debtor enormous latitude and powers while it is endeavoring to restructure its affairs, while nonetheless providing creditors and other parties in interest the opportunity to monitor the proceedings and to be heard on major issues. Among other things, Debtors are given the ability to reject leases and other executory agreements that are disadvantageous, compromise debts by means of a plan of reorganization (without the necessity of obtaining a settlement with each creditor), to recover certain prepetition payments that were made, and many other extraordinary rights and powers.
The goal of a Chapter 11 case is confirmation of a plan of reorganization. The Chapter 11 plan must address each category of creditors. The plan, among other things, sets forth the distributions to each class of creditors and equity holders. It is sent to each creditor entitled to vote thereon with a disclosure statement. The disclosure statement must include enough information for creditors to determine whether they should vote for or against the plan. If enough creditors do not vote in favor of the Chapter 11 plan, the court generally will not confirm the plan. Therefore, many Chapter 11 cases involve intense negotiations with creditors to secure their approval of the plan. The plan process can be highly complex and contentious. Obviously, this summary is intended only as a brief overview, and for a true understanding of this complex process you should speak with a New Jersey bankruptcy attorney.
A plan of reorganization may propose to reject leases and contracts in addition to reducing the debt owed to certain creditors. In addition, the Chapter 11 plan may call for some debts to be satisfied in full by surrendering the collateral to the creditor.
Even though a Chapter 11 plan may receive overwhelming approval from creditors, the confirmation of the plan rests with the bankruptcy court. The court must find that the Chapter 11 bankruptcy plan meets all requirements under the Bankruptcy Code for a Chapter 11 plan under Section 1129 of the Bankruptcy Code.
If the court does not believe the plan satisfies all the requirements, it will not confirm the plan. The debtor may be required to revise or amend the plan before the court confirms the plan. It is important to understand that creditors and other parties in interest may file competing Chapter 11 plans once the exclusive time expires for the debtor to file a proposed plan. The plan process can often be contentious and may engender litigation. The plan, if confirmed by the court, provides for the treatment of various classes of creditors, and may provide a roadmap for the debtor’s successful reorganization.
Alternatives to Bankruptcy.
In many situations involving smaller and middle-sized businesses, a formal bankruptcy filing may not be ideal. Fortunately, there are other options available to a troubled business, and small businesses are often well advised to forego filing a formal bankruptcy petition and pursue one of many other possible avenues of restructuring.
Alternatives to a Chapter 11 filing include:
(i) assignments for the benefit of creditors,
(ii) informal workouts or settlements with secured or unsecured creditors,
(iii) out of court compositions with creditors, and
(iv) consensual secured party sales of assets pursuant to Article 9 of the Uniform Commercial Code.
Each of these mechanisms is complex and has signficant advantages and disadvantages. Determining the right strategy for your business involves detailed analysis and consideration of both business and legal issues.
Small Business Bankruptcies.
An exciting recent development is the enactment of Subchapter 5 of Chapter 11 of the United States Bankruptcy Code (the “SBRA”). The SBRA provides for a very streamlined and efficient reorganization process for “small business debtors”.
The Small Business Reorganization Act was enacted in late 2019 and became effective in February of 2020. The Cares Act (which was enacted in March 2020) expanded applicability of the Small Business Reorganization Act temporarily so that it now applies to business with unsecured debts of up to 7.5 million dollars (as opposed to its original limitation of $2.725,625 million).
The Small Business Reorganization Act is a game changer for small businesses. Among other things, it allows: The SBRA affords businesses an opportunity to restructure rather than liquidate by offering a path to restructuring with lower costs and fewer procedural burdens.
Highlights of the SBRA include:
(i) A fast and highly streamlined Chapter 11 bankruptcy process (leading to filing a plan of reorganization within 90 days),
(ii) The requirement of filing a detailed disclosure statement with the plan is eliminated,
(iii) The case culminates in a three to five-year payment plan based on the Debtors disposable income (subject to a number of requirements, including a requirement that the plan is “fair and equitable” and pays creditors more than they would receive in liquidation).
(iv) U.S. Trustee fees, which can be a substantial outlay in a Chapter 11 case, are not imposed.
(v) Unlike other Chapter 11 cases, there is no creditors committee appointed (and instead a standing trustee supervises the case).
(vi) Business owners can retain their ownership interests more easily than in ordinary Chapter 11 cases (without having to contribute “new value”).
What to do?
The only way to determine the right path for your troubled business is to consult with a local bankruptcy lawyer who has significant business bankruptcy experience. In some instances, a financial adviser who focuses on troubled businesses can play a key role as well. Strategic input of management, insolvency professionals and important parties in interest is essential to charting the best path. Silverberg Law Firm LLC has the experience and knowledge necessary to help.
Similarly, creditors of businesses impacted by the pandemic may face enormous challenges in mitigating losses and maximizing the amount of their recovery. Our years of experience dealing with small business and middle market businesses, will be brought to bear in helping you collect.
Representing creditors in bankruptcy matters poses unique challenges and opportunities. There are strategic decisions to make. It is not simple, and there is no substitute for experience. Our experience that we have will help our clients make the right decisions to reach the best possible outcome. We have deep experience in handling cash collateral motions, DIP financing motions, motions to lift the automatic stay, and the like to help protect and enforce our clients’ interests. We know how to carefully oversee a Chapter 11 or out of court insolvency case to protect the interest of our clients. Our experience acting as Debtor’s counsel in numerous cases provides us with unique insight and a broader vision than most creditors’ attorneys.
If your business is struggling, or you are impacted by a distressed business, we would be happy to consult with you. Is your business facing:
- Collection actions
- Debt collection lawsuits
- Bank account attachment
- Seizures of other property
- Tax Liens
- Loan default
Covering The Entire State of New Jersey
- Atlantic County, New Jersey
- Bergen County, New Jersey
- Burlington County, New Jersey
- Camden County, New Jersey
- Cape May County, New Jersey
- Cumberland County, New Jersey
- Essex County, New Jersey
- Gloucester County, New Jersey
- Hudson County, New Jersey
- Hunterdon County, New Jersey
- Mercer County, New Jersey
- Middlesex County, New Jersey
- Monmouth County, New Jersey
- Morris County, New Jersey
- Ocean County, New Jersey
- Passaic County, New Jersey
- Salem County, New Jersey
- Somerset County, New Jersey
- Sussex County, New Jersey
- Union County, New Jersey
- Warren County, New Jersey
Want To Know More?
We love helping troubled businesses and would be happy to speak with you.
ATTORNEY ADVERTISING — Prior results do not guarantee any outcome. The information on this website is for general information purposes only. Nothing on this site should be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or viewing does not constitute an attorney-client relationship. We are a debt relief agency. We are attorneys who help people file for bankruptcy relief under the bankruptcy code.
Central New Jersey (by appointment only)
1 Severn Way, Monroe Township, New Jersey 08831