Subchapter 5 in Chapter 11 Bankruptcy
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Get Your FREE Bankrupty EvaluationQualifications for Subchapter 5
To qualify for a Subchapter V case, you must be engaged in commercial or business activities with total secured and unsecured debts of no more than $7,500,000 as of the date of filing. At least 50 percent of these debts must have come from your commercial or business activities. However, if your business’s primary activity is owning and running a sole property, you are not eligible for Subchapter V bankruptcy
Benefits of Subchapter 5
Several benefits exist for smaller businesses seeking a Subchapter V bankruptcy case, including the following:
- Business remains in operation. During the Subchapter V case, you will be able to keep your business open, remaining the owner, if you continue to follow the repayment plan approved by the court.
- Creditor approval is not needed. In a normal Chapter 11 case, your creditors must vote to approve your repayment plan. In a Subchapter V case, the approval is not needed for the court to confirm your reorganization plan. This elimination cuts a lot of time out of the process since the creditor approval requirement can involve a lot of back-and-forth negotiations.
- Only the business can file a plan. Also in a normal Chapter 11 bankruptcy case, creditors are allowed to submit plans on your behalf, and these can be approved by the court. In a Subchapter V case, you retain control over the process, and only you can submit a repayment or reorganization for your business.
- Detailed disclosures are not needed. In a Chapter 11 case, you must submit a very detailed disclosure statement to the bankruptcy court. This disclosure includes a breakdown of your business and its finances to see if you can repay your creditors. This detailed disclosure is not required for a Subchapter V case.
- Special trustee appointed. A bankruptcy trustee is not always needed in Chapter 11 cases, but a special trustee will be appointed to help you in keeping your business open and running throughout the case. The trustee also makes recommendations to the court regarding confirming your reorganization plan.
- Administrative fees may be paid in installments. The fees needed to start a Chapter 11 case can be a lot, and they normally must be paid in full before your reorganization plan can be confirmed. In a Subchapter V case, however, you are allowed to pay these fees over the course of the plan.
The Subchapter V Process
Following the filing of your petition for bankruptcy, the bankruptcy court will hold a status conference within 60 days of filing to determine how your case will proceed. With a Subchapter V plan, you must submit your reorganization plan within 90 days of filing for bankruptcy, which is a much quicker process than standard Chapter 11 cases. Your plan should be quickly approved so long as the court sees that you have allocated enough money towards your repayment plan.
You will retain complete control over your business, even if your repayment plan does not fully pay your unsecured creditors. Your plan can also be approved by the court even with the objections of your creditors.
You should expect to work with an appointed bankruptcy trustee during your Subchapter V case. Their role is like that of a Chapter 13 trustee. They oversee your plan and ensure that everything is moving smoothly in accordance with what the court has approved, including making sure that payments are made under the plan. They also may appear at any major hearings and can investigate your conduct, including your assets and debts.
Subchapter V cases tend to move much quicker than a traditional Chapter 11 case, which can take years to successfully complete, which is yet another reason small business filers find this type of bankruptcy more appealing.
If you are a small business struggling with debt, call us today to schedule a free consultation. The Benenati Law Firm has eliminated nearly a billion dollars of debt for its bankruptcy clients, making the firm one of the top twenty filers of bankruptcy in the nation. We have helped thousands of individuals and businesses eliminate their debt and get a fresh start financially. The day you hire our firm, we will contact your creditors to stop the harassment and collection calls. We make our hours convenient for our clients and offer FREE digital sign-ups and consultations on Saturdays (9:00 a.m. – 3:00 p.m.) and throughout the week until 5:00 p.m. If you or your business are in a financial crisis and considering filing for bankruptcy, contact an experienced Orlando bankruptcy attorney who can advise you of all of your options.
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