What is a Small Business Debtor’s Role in Subchapter V of Chapter 11 Bankruptcy?

Small business debtors play a large role in Subchapter V of Chapter 11 bankruptcy and they have many responsibilities.

The role of a small business debtor in Subchapter V of Chapter 11 bankruptcy is to retain possession of their business and continue daily business operations while also navigating the reorganization process. The Subchapter V process was created by the Small Business Reorganization Act of 2019. It gives the debtor more control over the reorganization plan than what is provided in a traditional Chapter 11 case.

What are the Duties of a Small Business Debtor in Subchapter V?

Small business debtors play a very active role in Subchapter V of Chapter 11 bankruptcy. Their duties are as follows:

• Continued business operations: While creating a reorganization plan to repay creditors, small business debtors also continue to manage the daily operations of their business and assets.
• Proposing the reorganization plan: Only small business debtors can file the reorganization plan with the courts in Subchapter V. Debtors must submit this plan within 90 days of filing bankruptcy. Although there are exceptions to this deadline, they are limited.
• Creating a fair reorganization plan: Small business debtors must create a reorganization plan that is fair to all parties. The plan must show that the debtor will dedicate all of their projected disposable income to repay creditors outlined in the plan over a period of three to five years.
• eWork with the trustee Unlike in traditional Chapter 11 bankruptcy, a trustee is appointed to all Subchapter V cases. Debtors must work with the trustee to create a fair plan.
• Participate in conferences and meetings: Small business debtors must attend a meeting of the creditors and a status conference. The status conference is held within 60 days of filing and debtors must provide a status report regarding the reorganization plan.
• Compliance with the plan: After the court has approved the reorganization plan, debtors must make all payments outlined within it. Once all payments are made, the debtor’s remaining debts are typically discharged.

Benefits of Subchapter V for Small Business Debtors

There are many advantages for small business debtors who file Subchapter V. The debtor is the only one who can file the reorganization plan, which prevents creditors from filing plans that are harder for the borrower to complete. Debtors also keep control of their business during Subchapter V.

Subchapter V does not require full disclosure statements and the meeting of the creditors is not as extensive as in traditional Chapter 11 cases. Eliminating these requirements means Subchapter V is typically faster and less expensive.

Perhaps most importantly, Subchapter V gives borrowers a greater chance of retaining their business instead of facing liquidation.

Call Our Bankruptcy Lawyer in West Palm Beach Today

If you are a small business owner who is considering Subchapter V, call our West Palm Beach bankruptcy lawyer at Brian K. McMahon, P.A. today. Our experienced attorney can help you through the process, ensure you fulfill all responsibilities, and give you the best chance of a favorable outcome. Call us today at (561) 658-1789 or fill out our online form to schedule a free consultation and to learn more about how we can help.