SMALL BUSINESS BANKRUPTCY – CHAPTER 11 SUBCHAPTER V

by | Jul 15, 2022 | Chapter 11, SubChapter V |

In February 2020, SubChapter V, the Small Business Bankruptcy Act, was added to Chapter 11. The intention was to make a more affordable form of Chapter 11 with fewer obstacles for small businesses. Several prior amendments intended to help small businesses in a bankruptcy were for the most part unsuccessful. However, having now filed and completed a number of SubChapter V bankruptcies in both Southern New Jersey and Philadelphia Pennsylvania, it has become apparent that the goal was accomplished. Many obstacles or time consuming requirements were eliminated. The need for a separate Disclosure statement was removed, as was the absolute priority rule. The absolute priority rule requires an objecting class of unsecured creditors to be paid in full before a more junior class is paid. This often becomes a roadblock to getting a plan confirmed. The debtor no longer has to pay quarterly fees. In addition, time frames for filing a plan were reduced which shortens the time in Chapter 11, thereby reducing attorneys fees and administrative costs. Furthermore, no longer is a creditors committee appointed in the case.

Recently I had a SubChapter V case in South Jersey confirmed by the bankruptcy judge just five months from the filing of the case. This is a short period of time in the world of business bankruptcies. Despite all these added advantages, Chapter 11 is still a complex process requiring a experienced attorneys in business bankruptcy law to help navigate through the process.

 

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