Is Subchapter V Bankruptcy Available for My Business?
Is your business currently struggling with debt? Many small businesses in South Florida are facing financial difficulties, and many are considering the possibility of bankruptcy. While Chapter 7 bankruptcy cases for businesses do require business closure, reorganization bankruptcies are much different. The most common type of reorganization bankruptcy for businesses is Chapter 11, although there are some situations in which certain types of businesses or businesses structured in a particular way might file for Chapter 12 or Chapter 13 bankruptcy. In general, Chapter 11 bankruptcy is more complex and expensive than those other types of reorganization bankruptcy, but there is often another option for smaller businesses: Subchapter V, which falls under Chapter 11 bankruptcy. It is more streamlined and less expensive than a traditional Chapter 11 bankruptcy, and thus a more favorable type of bankruptcy for businesses that are eligible.
If your business is not eligible for another type of reorganization bankruptcy and must file under Chapter 11, you are likely wondering: is Subchapter V bankruptcy available for my business? Our West Palm Beach bankruptcy attorneys can tell you more about the requirements, and we can speak with you today about the specifics of your business and its needs.
Requirements for Subchapter V Bankruptcy
What requirements does your business need to meet in order to be eligible to file for Subchapter V bankruptcy? These are the primary requirements:
- Debtor must be engaged in commercial or business activity (not including single-asset real estate);
- Debtor must have at least 50 percent of its debts from commercial or business activity; and
- Debtor must not exceed the $7.5 million debt threshold (this debt amount will remain applicable until 2024 but could be extended).
Why Should Your Business Consider Subchapter V?
What are some of the key benefits of Subchapter V bankruptcy such that your business should determine its eligibility? There are a number of ways in which Subchapter V is less complicated and less costly than a traditional Chapter 11 case, including but not limited to the following:
- Trustee is appointed to oversee the debtor’s estate and reorganization (more like in a Chapter 12 or Chapter 13 case);
- No need for a separate disclosure statement in a Subchapter V bankruptcy, which speeds up the case;
- Easier to confirm reorganization plans in a Subchapter V case than in a traditional Chapter 11 case (as the U.S. Courts explain, in Subchapter V cases, there are “relaxed plan confirmation requirements”).
Contact a West Palm Beach Bankruptcy Attorney
Businesses frequently experience financial problems and consider a reorganization bankruptcy. It is important to know that reorganization bankruptcies do not require you to close your business. In fact, as we have discussed, during a reorganization bankruptcy under Subchapter V (or in a traditional Chapter 11 case), your business can continue operating while getting on track with creditors. If you have questions about your eligibility for Subchapter V, or if you want to learn more about reorganization bankruptcy options for your business, you should contact one of the experienced West Palm Beach bankruptcy lawyers at Kelley, Kaplan & Eller today.