Your Guide to Subchapter V Bankruptcy

If you are a business owner and have been considering the possibility of filing for bankruptcy, you might have heard about Subchapter V, a relatively recent addition to the range of bankruptcy options that may be available for small businesses in South Florida. Regardless of whether you have heard about Subchapter V bankruptcy, it is something you should learn more about and should potentially consider if you meet the eligibility requirements. The experienced West Palm Beach bankruptcy lawyers at Kelley, Kaplan & Eller can provide you with more information about Subchapter V bankruptcy, and we can speak with you today if you want to find out more about filing.

What is Subchapter V Bankruptcy? 

Subchapter V is a type of reorganization bankruptcy that was established in 2019 through the Small Business Reorganization Act (SBRA) and took effect in February 2020. This type of bankruptcy is a subchapter of Chapter 11, which means that it is related to a traditional Chapter 11 bankruptcy. It was created in order to make it easier for smaller business debtors with limited amounts of debt to seek bankruptcy protection and to have an opportunity to reorganize debts and to regain financial control of their business without the costs and complexity associated with a traditional Chapter 11 case.

Which Debtors Are Eligible for Subchapter V? 

There are very specific requirements that a debtor must meet in order to be eligible for Subchapter V bankruptcy. Those requirements include all of the following:

• Debtor is engaged in commercial or business activities;
• Those commercial or business activities are something other than primarily owning or operating a single piece of real estate;
• Debtor’s debts do not exceed the threshold of $3,024,725 for secured and unsecured debts combined; and
• At least 50 percent of the debtor’s debt resulted from the debtor’s commercial or business activities.

While the debt ceiling used to be significantly higher, that increase to the debt threshold was only temporary. You should make sure your business meets all of the above requirements before filing, or speak with a lawyer to determine your eligibility for Subchapter V.

Benefits of Subchapter V Bankruptcy 

There are many benefits of Subchapter V for eligible businesses. In a Subchapter V case, there is no automatic appointment of an unsecured creditors’ committee, and only the debtor proposes a repayment plan (whereas in a traditional Chapter 11 case, creditors can propose competing plans). In addition, the debtor’s proposed repayment plan can be confirmed by the court without consent from creditors. Together, these changes, along with some others, mean that a Subchapter V case may be a better option for some small businesses.

Contact Our West Palm Beach Bankruptcy Attorneys Today 

If your business is considering bankruptcy, it is essential to learn about Subchapter V and to determine whether or not your business could be eligible — especially if you are thinking about a reorganization bankruptcy and looking for ways to handle debt while keeping your business open. To learn more about Subchapter V or any other type of bankruptcy for a small business, you should get in touch with an experienced West Palm Beach bankruptcy lawyer at Kelley, Kaplan & Eller. Contact us today for assistance with your bankruptcy case.

Sources:

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