What is a Confirmation Hearing in Subchapter 5 and How Does it Work?

The confirmation hearing is an important part of filing Subchapter V, and before filing, it is important to know how it works.

Subchapter V is part of Chapter 11 bankruptcy, and it offers a process that is more streamlined and cost-effective for small business owners. Subchapter V allows small business debtors to reorganize their finances so they can repay their debts while still continuing business operations. Subchapter V is relatively new, as it was only introduced in February of 2020. As such, many small business owners are not entirely aware of what it entails. The confirmation hearing is an important part of Subchapter V. During the hearing, a bankruptcy judge will decide whether to approve or confirm your proposed plan.

Prior to the Confirmation Hearing

Before the hearing, you must file the reorganization plan with the court. Unless the court orders it, you are not required to file a disclosure statement. After a bankruptcy trustee is appointed to your case, they will review the proposed reorganization plan. They will also review your financial situation and help facilitate the reorganization plan. The creditors you still owe debts to are given a copy of the plan, and they must act quickly, as the process is expedited.

During the Confirmation Hearing

The purpose of the confirmation hearing is for the judge to review your plan, determine if it is feasible, and confirm that it meets the legal requirements. If the plan is approved, it becomes official, and you must complete it accordingly. In Subchapter V, reorganization plans can be approved even if creditors object. This is sometimes known as a cramdown.

If the judge denies the reorganization plan, you may have several steps available. Borrowers often have to modify and resubmit the plan according to the reason for denial. For example, if your plan was denied due to unfeasibility, you could modify the plan with more realistic payment amounts. You can then file the amended plan with the court.

Some borrowers convert their case to Chapter 7 bankruptcy. However, it is important to note that businesses generally cannot remain open because Chapter 7 is a liquidation bankruptcy, and the company’s assets will be sold to repay creditors.

After the Confirmation Hearing

If the proposed reorganization plan is approved, the bankruptcy trustee will then monitor your adherence to the plan. If you fail to make payments according to the plan, you risk your case being dismissed and will not receive relief through Subchapter V.

Our Bankruptcy Lawyer in South Florida Can Help You Through the Process

Subchapter V can bring relief to small business owners like you, but it is important to have legal help throughout the process. At Brian K. McMahon, P.A., our South Florida bankruptcy lawyer can help with your plan to ensure it is approved and that you obtain the debt relief you need. Call us now at (561) 658-1789 or contact us online to schedule a consultation and to learn more about how we can help.