Chapter 11 or Subchapter V: Which is Right for My Business?
Are you an owner of a small business in South Florida that is currently dealing with financial difficulties? If so, you may be considering a type of reorganization bankruptcy. There are multiple types of reorganization bankruptcies that businesses can file, depending on the size of the business, the structure of the business, the amount of debt, and other factors. Traditionally, Chapter 11 bankruptcy has been the most common form of reorganization bankruptcy for businesses. In 2019, however, the Small Business Reorganization Act of 2019 created Subchapter V bankruptcy — a subchapter of Chapter 11 that certain businesses could be eligible to file for beginning in February 2020.
The marketing around Subchapter V suggested that this type of reorganization bankruptcy process would be more streamlined and thus a better option for smaller businesses, but whether or not this is actually the case for a particular business will depend on many factors. If your business is considering filing for a type of reorganization bankruptcy, is a Subchapter V or a traditional Chapter 11 case the right decision for your business? Our West Palm Beach bankruptcy lawyers can provide you with more information.
Eligibility for Subchapter V
Before you begin to think about whether your business should file for Subchapter V or a traditional Chapter 11 bankruptcy, it will be important to determine whether or not your business is actually eligible for a Subchapter V filing. To be eligible for Subchapter V, all of the following must be true of a business:
- Have debts that do not exceed the threshold of $3,024,725;
- At least 50 percent of debt must come from the debtor’s commercial or business activities; and
- Debtor is not a single asset real estate debtor.
Pros and Cons of Subchapter V
If your business is eligible for Subchapter V bankruptcy, your business may be able to choose between Subchapter V and a traditional Chapter 11 filing. It is important to know that there are pros and cons of Subchapter V that you will want to consider.
While Subchapter V does not involve a creditors committee, which can be good for a small business, some of the aspects of Subchapter V that were designed to make it easier can actually make the bankruptcy process more complicated for certain businesses, such as the shorter timeline. The best way to determine which type of reorganization bankruptcy is best for your business is to seek advice about your business’s particular circumstances from an attorney in South Florida who routinely handles business reorganization bankruptcy cases.
Contact Our West Palm Beach Bankruptcy Attorneys Today
Since Subchapter V bankruptcy became available, many smaller businesses in South Florida have considered this type of reorganization bankruptcy. While this form of bankruptcy promises an easier process than a traditional Chapter 11 case, that might not always be true in practice, even if your business appears to be eligible for Subchapter V. At the same time, certain small businesses can move forward with a Subchapter V filing and thrive. To determine which type of reorganization bankruptcy is right for your business, it is important to seek legal advice. An experienced West Palm Beach bankruptcy lawyer at Kelley Kaplan Delaney & Eller, PLLC can assess your business’s financial circumstances today and begin working with you on the type of reorganization bankruptcy that is best suited to your business’s structure and needs.
Sources:
law.cornell.edu/uscode/text/11
justice.gov/ust/subchapter-v
