When is Subchapter V the Best Option for a Small Business?
For any small business in the West Palm Beach area that is currently considering a bankruptcy filing, it is essential to speak with one of our West Palm Beach bankruptcy lawyers about your options and your plans for filing. There are many different types of business bankruptcy in South Florida, and it will be critical to determine the specific needs of your business and your business’s eligibility for different types of bankruptcy. When is Subchapter V the best option for a small business? It will depend on important factors that a West Palm Beach bankruptcy attorney can discuss with you, focusing on the particular details of your business and its financial circumstances. In the meantime, the following are some questions that can help you to know if Subchapter V might be the best option for your South Florida business.
Are You Seeking a Reorganization Bankruptcy?
First, is your business seeking a reorganization bankruptcy or a liquidation bankruptcy? Or, to put it another way, is your business planning to close permanently as part of filing for bankruptcy, or are you hoping to restructure business debts and to remain open during the ongoing bankruptcy case? If the latter — if you want to restructure business debts and for the business to remain open — then it is certainly worth learning whether you are eligible for Subchapter V bankruptcy, which is a type of reorganization bankruptcy.
Are You Eligible for Subchapter V Bankruptcy?
If your business is seeking a reorganization bankruptcy, you should certainly discuss with a lawyer whether your business is eligible for Subchapter V. This is a relatively new type of bankruptcy — a subchapter of Chapter 11 — that came into existence through the Small Business Reorganization Act of 2019 and took effect in February 2020. Through June 24, 2024, the debt limit is $7.5 million, and that could be extended beyond that date in June. Otherwise, eligibility requires a much lower total debt.
There are also additional eligibility requirements. In full, the following must be true:
- Debt within the set limit ($7.5 million until at least June 2024);
- Debtor must be engaged in commercial or business activities;
- Commercial or business activities cannot be single-asset real estate; and
- 50 percent or more of the total debt must come from commercial or business activities.
If you do not meet the eligibility requirements, another form of reorganization bankruptcy may be appropriate for your business.
Contact Our West Palm Beach Bankruptcy Attorneys Today
Is your business considering the possibility of filing for bankruptcy? The best way to determine the type of business bankruptcy that meets your needs and to ensure that you are eligible is to speak with an experienced West Palm Beach bankruptcy lawyer at Kelley Kaplan & Eller, PLLC as soon as you can. We have years of experience representing clients in a wide range of bankruptcy cases, and we can answer any questions you have today about corporate bankruptcy or specific types of bankruptcies for smaller businesses. And once you are ready to file, our firm is here to assist you throughout your bankruptcy case. Contact us today for more information.
Sources:
uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-11-bankruptcy-basics
justice.gov/ust/subchapter-v
