Who Qualifies for Subchapter V of Chapter 11 Bankruptcy in Florida?

Subchapter V of Chapter 11 bankruptcy is an attractive option for many small business owners, but not everyone qualifies. Our West Palm Beach bankruptcy lawyer explains in detail.

Subchapter V of Chapter 11 bankruptcy is a great option for many small business owners. However, it is not always available to everyone. There have been many changes made to the law regarding eligibility for Subchapter V of Chapter 11. If you are considering this option, it is critical to speak to a West Palm Beach bankruptcy lawyer.

What is Subchapter V of Chapter 11 Bankruptcy?

Before understanding whether you are qualified to file Subchapter V, it is critical to know what it is and the process involved. As its name suggests, Subchapter V is a subchapter of Chapter 11 bankruptcy, which is mainly used by businesses. It was enacted as part of the Small Business Reorganization Act of 2019.

The main purpose of enacting the law was to make Chapter 11 available to small business owners specifically. Under this law, it can be easier and less expensive for small business owners to file for bankruptcy. It also provides better outcomes for small business owners.

What is the Debt Ceiling in Subchapter V Bankruptcy?

The debt ceiling, also known as the debt limit, is an important part of Subchapter V in Chapter 11 bankruptcy. This debt ceiling limits the amount of debt a borrower can carry when filing for bankruptcy. Businesses cannot carry more than $3,424,000 in debt to be eligible for Subchapter V in Chapter 11. Debts owed by affiliates do not count towards the borrower’s debt ceiling.

Due to the fluctuating debt ceiling, it is always best to speak to an attorney who can advise you of any recent changes in the law before you file.

Other Eligibility Requirements for Subchapter V

In addition to the debt ceiling, there are other eligibility requirements, as well. One of these is that at least half of the borrower’s liquidated, non-contingent, unsecured, and secured debts must have resulted from business or commercial activities. This requirement applies to all qualified borrowers, including individuals. Borrowers can be individuals engaging in business activities, partnerships, or corporations.

Our Bankruptcy Lawyer in West Palm Beach Can Determine if You are Eligible

Determining if you are eligible to file Subchapter V of Chapter 11 bankruptcy is not easy. At Brian K. McMahon, P.A., our West Palm Beach bankruptcy lawyer can review the facts of your case, determine if you are eligible, and help you through the process so that mistakes are not made and you obtain the most favorable outcome. Call us today at 561-658-1789 or chat with us online to request a free consultation and to get the legal advice you need.