Small Business Bankruptcy Lawyers in Hartford County
Helping You File a Successful Subchapter V Bankruptcy
Are you a small business owner? You may have been discouraged from filing Chapter 7 or Chapter 13—with good reason. Chapter 7 doesn’t provide the same relief for businesses as it does for individuals, and it usually liquidates the entire business. Chapter 13, meanwhile, is only available to individuals.
You might have also heard about Chapter 11 bankruptcy, which has allowed powerful corporations to reduce their financial obligations without going out of business (e.g. United Airlines, General Motors, and more). But is this an option for you?
As of February of 2020, yes. When Congress passed the Small Business Reorganization Act of 2019, Chapter 11 bankruptcy gained a new section called Subchapter V. Subchapter V is exclusively available to small businesses. It removes many of the expenses and legal obstacles found in a typical Chapter 11 case. In essence, Subchapter V could allow you to reduce your debt without losing your company.
The Subchapter V Process
As a cost-effective, streamlined version of Chapter 11, Subchapter V bankruptcy is very similar to Chapter 13, but it’s for businesses instead of individuals. You will propose a reorganization and repayment plan that will take 3-5 years to complete, and the court will discharge remaining unsecured debt at the end of the plan. You will likely retain full control over your business operations, but you will need to obtain approval from the court before making certain decisions, and you’ll need to meet regular reporting requirements.
Your repayment plan must use all your projected disposable income. Under Subchapter V, your disposable income is your total revenue minus the funds needed to operate, preserve, and support your business, as well as funds needed to pay domestic support obligations.
One of the biggest differences between Subchapter V and regular Chapter 11 is that Subchapter V does not implement the Absolute Priority Rule. Under the Absolute Priority Rule, secured creditors must be paid in full before unsecured creditors, and unsecured creditors must be paid before shareholders and equity holders. Without the Absolute Priority Rule influencing your case, you will have a greater likelihood of retaining ownership of your assets. In fact, the court can implement your plan without obtaining approval from creditors.
To qualify for Subchapter V, your small business must owe no more than $2,725,625* in secured and unsecured debts. At least 50% of this debt must have been accrued through business or commercial expenses.
*Per the CARES Act, passed in March of 2020 to help individuals and businesses survive the financial ramifications of COVID-19, the maximum amount of debt a small business can owe and still qualify for Subchapter V is $7,500,000 until March of 2021.
Let’s Get Started on Your Plan Today
Is your business struggling to stay afloat because of overwhelming debt? Subchapter V bankruptcy may be the solution you need. Although simpler than regular Chapter 11, Subchapter V is a complex process with many steps and requirements, which is why you will need the support of our seasoned attorneys at Boatman Law. Since 1988, our firm has helped countless individuals and businesses use bankruptcy to vastly improve their financial circumstances.
“Her unique perspective and ingenuity increased the value of my case and I am so happy that I chose her as my attorney.”- Kristina H.
“With his attention to every detail, Pat always sustains vigilant oversight of the numerous competing priorities, timelines, and requirements related to the process and maintains focus on my and my company's best interests.”- Earle L.
“Pat and Jenna worked day and night on my behalf to help me through a very complicated Chapter 7 case. It is because of their expertise and dedication that I am getting the fresh start I so desperately needed in my life!”- Mike F.
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