Subchapter V of Chapter 11 Bankruptcy in Greenwood
Helping Small Businesses Overcome Unmanageable Debt
Effective as of Feb. 19, 2020, the Small Business Reorganization Act (SBRA) updated the Bankruptcy Code to make Chapter 11 easier for small businesses. Specifically, the SBRA added Subchapter V, designed to expedite and lower the cost of small business bankruptcy proceedings. At the Law Office of Matthew M. Cree, LLC, our Greenwood attorney is here to help you understand these changes and help your business navigate the road toward debt relief.
What You Need to Know about Subchapter V
- Eligibility - Whether you are filing as an entity or an individual, your debt must not exceed $2,725,625 (subject to adjustment every three years). At least half of this debt must be accrued through business or commercial expenses. As of Mar. 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act has temporarily increased the debt limit to $7,500,000, valid for one year. Unfortunately, you will not qualify for relief under Subchapter V if you are a single asset real estate debtor.
- Principle players – Prior to Subchapter V, a Chapter 11 trustee was only appointed for a specific reason, such as fraud or gross mismanagement, and they would seize control of your business operations. Under Subchapter V, a trustee will be automatically appointed to facilitate the consensual plan between you and your creditors, while leaving control of the assets and operations in your control. Involvement of an impartial third party is intended to promote a fair and equitable resolution.
- The process – The Chapter 11 bankruptcy process under Subchapter V is much quicker than traditional proceedings, which also serves to reduce administrative costs. A status conference will be conducted by the court within 60 days from the filing. You must file a Chapter 11 plan of reorganization within 90 days from filing a bankruptcy petition. The process from filing to confirmation is often completed within a few months. Additionally, you do not need to file a disclosure statement, and you are the only one who may file a plan.
- Plan confirmation – In a traditional Chapter 11 case, creditors could vote on a plan. However, under Subchapter V, you are able to confirm the plan without creditor approval. For this to occur, the plan must be fair and equitable, and the creditors will need to receive as much as if you had obtained liquidation in Chapter 7. You also have the option of contributing all projected disposable income to make planned payments over a 3-5-year period, similar to Chapter 13 bankruptcy.
- Timing of a discharge – If you are granted a consensual plan (i.e. approved by creditors), you are entitled to a discharge upon confirmation. If the plan is nonconsensual, you will receive a discharge following the completion of all plan payments.
Relief During the COVID-19 Pandemic
The COVID-19 pandemic has caused many businesses to suffer significant losses. Several companies are even needing to file for bankruptcy, even though they experienced steady levels of success before the pandemic. If the coronavirus has severely impacted your business, Subchapter V can help you to pause your obligations and attempt to negotiate with your creditors for the relief you need.
Although Subchapter V, along with other provisions like the CARES Act, are making it easier for small businesses to file Chapter 11 bankruptcy, this is still a decision that should be considered very carefully. The Law Office of Matthew M. Cree, LLC is here to help you make an informed decision about how to help your business overcome severe financial hardship.
I had a great experience with Matthew! He made the whole process simple.- Justin M.
Matt was professional, he handled everything.- Deanna B.
Attorney Cree made sure he explained everything making sure I understood.- Lisa L.
Mr. Matthew Cree is an AMAZING Attorney! He always answers your questions very promptly.- Kellie C.
Every time we had a question or concern he would get back to us that day.- Tyler H.