What are the Advantages of Filing Under Subchapter V of Chapter 11?
Subchapter V under Chapter 11 bankruptcy has become a popular option for small business owners. Our West Palm Beach bankruptcy lawyer explains the benefits in further detail.
Congress enacted the Small Business Reorganization Act of 2019 (SBRA) on February 19, 2020. This law is more commonly known as Subchapter V of Chapter 11 bankruptcy. The Act was established to help small business owners through the bankruptcy reorganization process. Subchapter V is meant to open the bankruptcy process to small business owners and make it less expensive for them while also giving them the opportunity for better outcomes. Subchapter V of Chapter 11 has many benefits. Our West Palm Beach bankruptcy lawyer explains what these are below.
Small Business Means Small Business
To ensure that Subchapter V is only used by small businesses that would not greatly benefit from a traditional Chapter 11 bankruptcy, there are limits placed on the amount of debt businesses can carry in order to qualify. The debt limit for small businesses is $3,424,000. This new limit means that only small businesses can qualify, making it more accessible to them.
No Requirement for Official Committees
In a traditional Chapter 11 bankruptcy, a U.S. trustee may appoint an official committee composed of the borrower’s unsecured creditors. The committee can object to the proposed reorganization plan if it disagrees with it. This can cause a delay in the process and make it more challenging to get the plan approved. In Subchapter V, there is no requirement for an official committee to be convened as long as the court finds the plan fair and equitable.
Reduced Fees and Administrative Costs
The SBRA also makes bankruptcy more affordable for small business owners by reducing fees and administrative costs for the borrower. For example, small business owners are not responsible for paying the fees of the U.S. trustee, which are based on the business’s disbursements.
A Sub-Chapter V Trustee is Appointed
In traditional Chapter 11 bankruptcy cases, a trustee is only appointed when it is deemed necessary, such as in cases of gross mismanagement or fraud. In Subchapter V, though, a trustee is automatically appointed. The trustee is involved throughout the entirety of a case, examines and objects to claims, and more. This is very helpful to small business owners who need to reach a resolution with their creditors.
Our Bankruptcy Lawyer in West Palm Beach Can Help You Through the Process
It is true that Subchapter V of Chapter 11 has many benefits. To ensure that you fully realize them, our West Palm Beach bankruptcy lawyer at Brian K. McMahon, P.A. can help. Our experienced attorney will determine if you are eligible, answer your questions, and ensure you obtain the best outcome possible. Call us today at 561-658-1789 or fill out our online form to request a free review of your case and to get the sound advice you need.