Business Bankruptcy in New York: 6 Differences Among the State's Four Districts

New York's federal districts and New York's homestead tiers divide the state along different lines, and an owner in Dutchess County sits inside the Southern District with Manhattan while keeping a smaller homestead than an owner in Nassau, who files in the Eastern. Which of the two maps matters depends on who is filing: the company, or the person who guaranteed its debts.

The Bankruptcy Code does not vary among the four districts. The courthouses, the written practice of each court, the Trustee office, and the state exemption figures do, and those six differences are the subject here. New York City's two courts, Manhattan and Brooklyn, receive a page of their own; this one concerns the state as a whole.

1. Four Districts, and the County Decides Which One

Under 28 U.S.C. 112, "New York is divided into four judicial districts to be known as the Northern, Southern, Eastern, and Western Districts of New York." The Southern District takes Bronx, Dutchess, New York, Orange, Putnam, Rockland, Sullivan, and Westchester counties. The Eastern takes "Kings, Nassau, Queens, Richmond, and Suffolk." The Northern District covers thirty-two upstate counties, Albany, Onondaga, and Oneida among them, and the Western includes Erie, Monroe, and Niagara, with court at Buffalo and Rochester among other places.

You find the county first. Everything else follows from it.

Within the Southern District, the local rules then assign a case by the debtor's principal place of business. Under Local Bankruptcy Rule 1073-1(a), a debtor based in Rockland or Westchester County is assigned to a judge sitting in Westchester County, and Dutchess County is among those assigned to Poughkeepsie. A company in Poughkeepsie and a company in Midtown share a district and not, as a rule, a judge.

2. Long Island Files in Central Islip

Nassau and Suffolk are Eastern District counties, and the statute lists Hauppauge and Hempstead (including the village of Uniondale) among the district's court sites. The bankruptcy court's Long Island office, though, is in Central Islip: the Alfonse M. D'Amato U.S. Courthouse, 290 Federal Plaza, Central Islip, NY 11722, "Serving Nassau and Suffolk Counties," telephone (631) 712-6200.

The U.S. Trustee keeps an office on the same plaza, at 560 Federal Plaza, Suite 560, in the Long Island Federal Courthouse, telephone (631) 715-7800. A Long Island business in chapter 11 therefore deals with a clerk and a Trustee office that share Federal Plaza as an address, and neither of them is in Brooklyn, though Brooklyn is the courthouse most people picture when they hear "Eastern District."

3. The Eastern District Writes Its Business Practice as Administrative Orders

The Eastern District's Chapter 11 Information page reads like a small library. Administrative Order No. 565 adopts guidelines "for 'first day' motions in business chapter 11 cases." Administrative Order No. 558 sets guidelines for financing motions, for chapter 11 debtors seeking to use cash collateral under section 363(c) or to obtain credit. Order 645 adopts "Procedural Guidelines for Prepackaged and Prenegotiated Chapter 11 Cases." There are orders on sale motions, monthly compensation of professionals, fee applications, and bar dates in cases with claims and noticing agents, a form "Order Scheduling Initial Case Management Conference," and a Chapter 11 Lawyers' Advisory Committee.

These are, if one is careful about the vocabulary, guidelines and administrative orders rather than statutes, and a judge may depart from them. In practice they set the expectations for what a first-day motion or a cash collateral request in the district will look like before anyone has argued it.

The Code tells a debtor what it may ask for. The Eastern District's orders tell it how the request should be dressed when it arrives.

Mediation is available as well. The court states that "A mediation program ... is now operational in the Eastern District of New York," under Local Rule 9019-1, with a Mediation Register of mediators and a pro bono mediation program established by order 546. A merchant cash advance dispute (whether the funder's claim is a purchase of receivables or a loan, what was actually remitted, what the reconciliation clause required) is the kind of contested matter that such a program exists to receive.

A company that has survived a year of daily debits reaches the courthouse with less cash and less patience than its lawyers would like, and the first-day orders are written for exactly that condition.

None of this material governs a case in Albany or Buffalo.

4. Upstate Courts Publish Different Things

The Northern District's clerk is at the James T. Foley United States Courthouse, 445 Broadway, Suite 330, Albany, with locations in Utica and Syracuse as well. Its court runs the "NYNB Mediation Program found in the Court's Local Rules, Appendix IV," with a panel of mediators. The Western District's clerk is at the Robert H. Jackson U.S. Courthouse, 2 Niagara Square, Buffalo, with a Rochester location, and the court posts a calendar of "Ch 11 Status Conferences (Buffalo Non-Subchapter V)."

The upstate local rules were not reviewed for this page, and a Rochester or Syracuse filer should expect its own court's practice to differ from the Eastern District's in ways a summary would only partly capture.

5. One Trustee Region, Spread Across the State

All four districts sit in Region 2 of the United States Trustee Program, which also covers Connecticut and Vermont. The regional office is in the Alexander Hamilton Custom House, One Bowling Green, Suite 739, New York. Upstate, the program lists offices in Albany (11A Clinton Avenue, Room 620), Buffalo (300 Pearl Street, Suite 401), and Rochester (100 State Street, Suite 4230), besides Central Islip, according to its directory of offices.

6. The Homestead Follows Counties, Not Districts

A company has no homestead. The exemption matters to a sole proprietor and to an owner who files personally over guaranties, and in New York its amount turns on the county.

CPLR 5206 sets three statutory tiers, and the Department of Financial Services publishes the current adjusted amounts. Effective April 1, 2024, the figures are $204,825 in Kings, Queens, New York, Bronx, Richmond, Nassau, Suffolk, Rockland, Westchester, and Putnam counties; $170,700 in Dutchess, Albany, Columbia, Orange, Saratoga, and Ulster; and $102,400 in every other county. The next adjustment is scheduled for April 1, 2027.

Laid over the district map, the tiers produce odd results. The Southern District contains all three: Westchester and Rockland in the top tier, Dutchess and Orange in the middle, Sullivan at the bottom. The Eastern District, by contrast, sits entirely in the top tier, since all five of its counties are on the $204,825 list. A Suffolk guarantor and a Sullivan guarantor with identical equity are protected to different amounts, and it has nothing to do with the court that hears their cases.

What Is Statewide, and Where Negotiation Fits

One more thing is uniform across the four districts. New York's Commercial Finance Disclosure Law, Financial Services Law article 8, reaches "sales-based financing," defined as a transaction "repaid by the recipient to the provider, over time, as a percentage of sales or revenue." Under 23 NYCRR Part 600, a covered offer of $2,500,000 or less comes with a disclosure that labels its rate an "Estimated Annual Percentage Rate (APR)," a compliance obligation reported to have begun in August 2023. The estimate is built on projected sales. It does not turn an advance into a loan or cap what the advance costs, though it gives counsel reviewing a funder's claim a document to read against the contract.

A New York company that needs the stay, or needs a plan a funder cannot block, needs New York bankruptcy counsel in the right district. Delancey Street is not a law firm and appears in none of the four courts. It reviews merchant cash advance and other business debt, confidentially and at no cost, to see whether a negotiated resolution is possible, and it works with independently licensed attorneys when a matter requires legal representation. Before any of that, the county goes on the first line of the file.