Nearly Half of Chapter 11 Cases Are Subchapter V Filings
For any small business owner in South Florida considering reorganization bankruptcy, the possibility of a Subchapter V filing should be something you discuss as soon as possible with an experienced West Palm Beach bankruptcy lawyer. Since it became available, a significantly large percentage of businesses have qualified for Subchapter V, as recent data from the Federal Judicial Center reveals. Until at least June 21, 2024, Subchapter V will remain largely accessible to a range of businesses due to the increased debt limit, and it is possible that Congress could extend that higher debt limit for a longer period of time.
If you are considering Subchapter V bankruptcy for your business, what should you know? Our West Palm Beach bankruptcy lawyers can tell you more about how this has become a common type of bankruptcy, and we can explain what you will need to show in order for your business to be eligible.
Popularity of Subchapter V Bankruptcy
In 2019, the Small Business Reorganization Act (SBRA) established Subchapter V bankruptcy, a subchapter of Chapter 11 bankruptcy. It was designed to streamline the bankruptcy reorganization process for smaller businesses that were likely to struggle amidst the complicated processes and costs associated with a traditional Chapter 11 case. When the SBRA was first passed in summer 2019, it limited Subchapter V cases to debtors with less than approximately $2.75 million in debt at the time the SBRA was passed. In response to the financial difficulties of the pandemic and the CARES Act, the debt limit was increased to a total of $7.5 million. That increased debt limit has been extended by Congress and is currently in place until June 21, 2024.
In part due to the debt limit extension, Subchapter V has become common among eligible businesses. In 2023, data shows that about 45 percent of all Chapter 11 cases filed were actually Subchapter V cases, totaling 1,854 filings.
Determining Eligibility for Subchapter V Bankruptcy
If your business is considering a Chapter 11 filing, what would it need to prove in order to be eligible to file for the more streamlined Subchapter V case instead? Currently, US bankruptcy law requires a debtor to meet the following requirements:
- Debtor must be engaged in commercial or business activities other than the primary owning and operation of a single piece of real property;
- Debtor must have combined secured and unsecured debts of $7.5 million or less (until June 21, 2024, at which point Congress may extend eligibility for that debt limit, or the debt limit may decrease); and
- At least 50 percent of the debt must be from the debtor’s commercial or business activities.
Contact a West Palm Beach Bankruptcy Lawyer Today
Is your business currently considering a reorganization bankruptcy and wondering about eligibility for Subchapter V? As the recent data discussed above shows, your business certainly is not alone. To be sure, thousands of businesses have successfully filed for Subchapter V in the last year alone. If you have questions about eligibility or want to learn more about the benefits of a reorganization bankruptcy for your business, you should contact one of the experienced West Palm Beach bankruptcy attorneys at Kelley Kaplan & Eller, PLLC today. Our firm has years of experience representing businesses in bankruptcy cases, and we can speak with you today about options.
Sources:
fjc.gov/research/idb/bankruptcy-cases-filed-terminated-and-pending-fy-2008-present
justice.gov/ust/subchapter-v
uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-11-bankruptcy-basics#:~:text=In%20order%20to%20file%20a,from%20the%20commercial%20or%20business
