Reasons to Consider Subchapter V Bankruptcy
Subchapter V bankruptcy is still a relatively new option for businesses. It was created in 2019 through the Small Business Reorganization Act (SBRA), and it was designed to streamline reorganization bankruptcies for smaller businesses with limited amounts of debt. Under the SBRA, small businesses can avoid some of the complications and costs of a traditional Chapter 11 case by filing for Subchapter V if they are eligible. To be eligible for a Subchapter V bankruptcy case, a business in South Florida must have less than $7,500,000 in combined secured and unsecured debts, at least half of the debt must have come from business activities, and the debtor must be currently and actively engaged in business activities.
If you believe your business is eligible for a Subchapter V bankruptcy case, you are also likely wondering about the benefits to this type of bankruptcy. The following are some key aspects of Subchapter V bankruptcy cases that are reasons to consider this particular type of bankruptcy if your business is eligible.
Reorganize Business Debts
Like a traditional Chapter 11 bankruptcy case, a Subchapter V bankruptcy case can allow your business to reorganize debts so that you can pay creditors over time and become solvent again as a business.
Remain Open While Catching Up On Debts
Also similar to a traditional Chapter 11 case and other types of reorganization bankruptcies, you can keep your business open and running during a Subchapter V case, with plans of remaining open indefinitely in the future.
No Absolute Priority Rule
Unlike a traditional Chapter 11 case, there is no “absolute priority rule” applicable to Subchapter V cases, which means that fewer creditors may need to be paid in full and creditors may be required to accept a lesser payment amount.
Only the Debtor Can File a Repayment Plan
Unlike in traditional Chapter 11 cases where creditors can propose repayment plans, Subchapter V only allows the debtor to file a repayment plan for the court’s approval.
No Required Creditor Consent
Debtors in Subchapter V cases do not need to have creditor consent for a repayment plan to be approved, which is different from traditional Chapter 11 cases and obviously benefits the debtor.
No Unsecured Creditors Committee
Subchapter V allows debtors to save on costs since it does not require the appointment of an unsecured creditors’ committee (except in cases where the court orders it).
Contact Our Bankruptcy Lawyers in West Palm Beach
Do you have questions about your business’s eligibility for Subchapter V? Whether you are just beginning to consider a reorganization bankruptcy for your business or you are prepared to file, it is important to get in touch with an experienced West Palm Beach bankruptcy lawyer at Kelley, Fulton, Kaplan & Eller to discuss your company’s circumstances. Since there are specific eligibility requirements to file for Subchapter V, you will want to ensure that your business is permitted to file. Contact us today to find out more about getting started on a Subchapter V bankruptcy case and to discuss any questions you have about business bankruptcy in South Florida.
Sources:
law.cornell.edu/uscode/text/11/chapter-11/subchapter-V
uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-11-bankruptcy-basics
