Suffolk County
Chapter 11 Bankruptcy Lawyer

In the case of an individual debtor, often the debt that requires reorganization in Chapter 11 is a mortgage that is in arrears. One way of dealing with mortgage arrears is a plan where the debtor will “catch up” or cure the arrears under a traditional Chapter 11 plan, typically over five (5) to eight (8) years. However, now that many foreclosures are based on arrears of many years, a “catch-up” plan would not always work, since it may be too expensive to pay both the post-petition monthly mortgage payment directly to the lender and a separate “catch-up” payment, especially where mortgages are for higher amounts, as is generally true in Chapter 11 cases filed by individual debtors. Therefore, seeking a mortgage loan modification through Loss Mitigation programs adopted by most Bankruptcy Courts has become a standard way to proceed. Loss Mitigation is the pursuit of a mortgage modification by the debtor, overseen and encouraged by the Bankruptcy Court, which can pressure both the debtor’s and lender’s attorneys to coordinate over documents and information to determine whether the debtor qualifies for a modification.

In the initial part of the case, the debtor makes a motion to the Bankruptcy Court for Loss Mitigation, trying to show it has the financial ability to sustain a potential modification of the defaulted mortgage loan. The lender’s attorneys have the right to oppose that motion. Assuming the motion is granted, the debtor and the lender’s attorneys are required to attend regular Loss Mitigation conferences to determine whether the effort to obtain a modification is still viable. During this time, the Chapter 11 debtor pays a hypothetical “adequate protection” payment to the lender, usually similar to the former mortgage payment, to demonstrate an ability to pay the estimated amount if the modification were approved, and to prevent the lender’s secured position from deteriorating while the potentially long reorganization continues.

If the Loss Mitigation efforts remain viable, the Court keeps adjourning the conferences. If they look like they are failing, and reapplication or appeal options are not realistic, the Court will end Loss Mitigation and eventually ask the Trustee to move for dismissal. On the other hand, if the effort results in a trial modification the debtor accepts and pays regularly, from three (3) months to a year, the lender will eventually offer a permanent modification agreement, subject to Bankruptcy Court approval after a motion. Once approved, the loan modification may be part of an overall Chapter 11 Plan under which the debtor reorganizes all of its debts. Although a confirmed plan generally lasts an average of five (5) to eight (8) years, and modifications usually run thirty (30) to forty (40) years, the majority of the modification would continue past the end of the Chapter 11 plan. Alternatively, if the defaulted mortgage was the only debt to address, the debtor can voluntarily dismiss the case once the permanent modification is obtained and approved.

A Suffolk County business Chapter 11 or Subchapter V is filed in the U.S. Bankruptcy Court for the Eastern District of New York, Central Islip division, at the Alfonse M. D’Amato Federal Courthouse, 290 Federal Plaza. Central Islip is in Suffolk, so the courthouse, the assigned judge, the Subchapter V trustee, and the status conferences are all in the county where the business operates. That is not a marketing line. It is where the case physically lives.

An owner keeping a company alive cannot spend days commuting to another borough for hearings. Because the Central Islip courthouse sits inside Suffolk, that time stays in the business. We file there, appear there, and know how the Central Islip judges and trustees run these cases. From our Melville and Bohemia offices, minutes from the courthouse, the reorganization is handled close to where the company actually operates.

Separately, a business debt lawsuit or a foreclosure on commercial property runs through the Suffolk County courts, not the bankruptcy court, and we coordinate the reorganization with whatever is already moving against the company. When a creditor is already suing or foreclosing, the timing of the Chapter 11 filing and the automatic stay has to be sequenced against those state-court deadlines, which is exactly the kind of local coordination an out-of-area filing mill cannot manage.