Does My Business Qualify For Subchapter V?
Is your business struggling with debt such that you are considering filing for Chapter 11 bankruptcy? If so, it is important to determine whether you could qualify for Subchapter V bankruptcy. As you might already know, Subchapter V is a specific type of Chapter 11 bankruptcy that is designed specifically for small business owners, and it has only been in existence for a couple of years. This type of Chapter 11 bankruptcy is more streamlined, and it is designed to make the reorganization bankruptcy process easier and quicker for small businesses. How can you qualify? Our West Palm Beach business bankruptcy lawyers can provide you with more information.
Debtor Usually Must Prove Eligibility for Subchapter V
If you want to file for Subchapter V bankruptcy, you should know that the burden of proof of your eligibility is on you. Indeed, according to a recent article on Subchapter V bankruptcies in Reuters, the debtor should plan to provide proof that they are eligible to file for bankruptcy under Subchapter V.
Subchapter V Eligibility
What are the key eligibility requirements for Subchapter V? In general, in order to be eligible for this type of bankruptcy, you will need to prove the following:
- Debtor is a person or corporation;
- Debtor is engaged in commercial or business activity;
- Debtor’s commercial or business activity does not focus on single-asset real estate;
- More than half of the debtor’s debt comes from its commercial or business activities; and
- Debtor does not have more than $7,500,000 in debt at the time of filing for bankruptcy.
The U.S. Bankruptcy Code explicitly excludes certain types of debtors from Subchapter V, including affiliated debtors that exceed the debt limit, certain debtors that are subject to Securities Exchange Act reporting requirements, and certain debtors that are considered issuers under the Securities Exchange Act. The definition of “commercial or business activity” generally is construed broadly by bankruptcy courts, as the Reuters article underscores. As such, many businesses that meet the other requirements are likely to qualify. However, it is nonetheless important to seek advice about your specific business circumstances from an experienced bankruptcy attorney.
How a Bankruptcy Lawyer Can Help
Before you attempt to file for bankruptcy under Subchapter V, it is essential to have an experienced bankruptcy attorney in West Palm Beach evaluate your circumstances and your eligibility for Subchapter V. Your attorney can clarify whether you meet the requirements, and whether you are engaged in commercial or business activity as required by the U.S. Bankruptcy Code. Your lawyer can also determine whether your business could be excluded from Subchapter V eligibility as a result of one of the exclusions cited above.
Contact a Business Bankruptcy Attorney in West Palm Beach
If you are considering a reorganization bankruptcy for your business, you should learn more about your potential eligibility for Subchapter V. Even if you are not eligible to file for a Subchapter V bankruptcy, our experienced West Palm Beach bankruptcy attorneys can assist you with a traditional Chapter 11 bankruptcy case. Do not hesitate to get in touch with the lawyers at Kelley Kaplan & Eller to learn more.