Can a not-for-profit organization file for Chapter 11 bankruptcy in New York State?

Asked on June 15, 2009 under Bankruptcy Law, New York

Answers:

David Hamilton / Dwyer & Associates

Answered 11 years ago | Contributor

The answer to this question hinges largely on the way that the entity is organized and the nature of its operations. In general, here in New York- yes.

Section 109 of the Bankruptcy Code dictates the eligibility requirements for a bankruptcy filing under any chapter of the Bankruptcy Code. Initially, it provides that "only a person that resides in or has a domicile, a place of business, or property in the United States, or a municipality, may be a debtor under [title 11.]" The statute expressly makes certain entities ineligible for certain kinds of bankruptcy relief, including railroads (which can only file for chapter 11), domestic insurance companies, banks, and savings and loan associations, all of which are subject to different legislative schemes enacted to effect their reorganization or dissolution. The Bankruptcy Code defines "person" to include any individual, partnership or corporation. Not-for-profit corporations qualifying for that status under applicable state law are eligible to file under both chapter 7 and chapter 11 of the Bankruptcy Code. Even unincorporated non-profit enterprises may qualify. However, if a not-for-profit enterprise is not organized as either a corporation or a "business trust" within the meaning of Bankruptcy Code section 101(9), it will not be eligible for relief under the Bankruptcy Code.

 


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