How Can My Business Qualify for Subchapter V?
Businesses in West Palm Beach and elsewhere in South Florida that are struggling with debt may be considering a bankruptcy filing. Unless you are certain that your business cannot recover financially and that it is time to close the doors, you are likely among the many and varied business owners who want to consider a type of reorganization bankruptcy. Unlike a liquidation bankruptcy, which requires all business assets to be liquidated and for the business to close, a reorganization bankruptcy allows businesses to restructure debt and to keep the business open while doing so. The goal of a reorganization bankruptcy is for a business to get back on track financially and to remain open for the long term, meaning long after the bankruptcy case concludes and the terms of the repayment plan are done.
While reorganization bankruptcies are popular among various types of businesses, they can be quite complicated and expensive when a business must file a traditional Chapter 11 case. Accordingly, many smaller businesses are eager to determine whether they can qualify for Subchapter V bankruptcy, which is a slightly more streamlined type of reorganization bankruptcy. Although it is a subchapter of Chapter 11, a Subchapter V case may be desirable for businesses if they are eligible. How can your business qualify? One of the experienced West Palm Beach bankruptcy lawyers at Kelley, Fulton, Kaplan & Eller can explain.
Requirements for Subchapter V Eligibility
What requirements does your business need to meet in order to qualify for Subchapter V instead of having to file a traditional Chapter 11 case? There are several basic requirements outlined under US bankruptcy law, which include the following:
- 1) Debtor must be engaged in commercial or business activities;
- 2) Debtor’s commercial or business activities must involve commercial or business activities other than primarily owning or operating a single piece of real property;
- 3) At least 50 percent of the total secured and unsecured debt must come from the commercial or business activity; and
- 4) Debtor cannot have combined secured and unsecured debts of more than $3,024,725.
That last element — concerning the debt ceiling — is particularly important for South Florida businesses to note because it dropped significantly in June 2024. Until then, the debt ceiling for Subchapter V was set at $7.5 million, so it is critical to understand that you will need to meet the requirements with the lowered debt ceiling.
Contact a West Palm Beach Bankruptcy Attorneys Today
If your business does not qualify for Subchapter V, your business certainly may be eligible for a traditional Chapter 11 filing. In addition, depending on the nature and structure of the business, it is possible that your business could qualify for another type of more streamlined reorganization bankruptcy, such as Chapter 12 or Chapter 13. The best way to determine eligibility is to speak with an experienced West Palm Beach bankruptcy lawyer at Kelley, Fulton, Kaplan & Eller. Contact us today to find out more about business reorganization bankruptcy options 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
