Subchapter 5 was a welcome addition to the already very beneficial and debt-liberating Chapter 11. The year 2019, the time when Subchapter 5 took real effect, was the starting point of making reorganization bankruptcy a lot more accessible to small and boutique businesses across the United States. However, it seems that many business owners still do not know as much as they should about this bankruptcy before they attend a Chapter 11 consultation in San Diego, CA.
What is Subchapter 5 of Chapter 11 bankruptcy?
The main goal of Subchapter 5 addition to the standard Chapter 11 bankruptcy is to create a better environment for small businesses to file a reorganization bankruptcy. The original Chapter 11 can be too complex for boutique businesses to file, necessitating a change.
Through Subchapter 5, a small business that’s experiencing trouble with managing their obligation gained access to a simplified process for eliminating some debt and easily paying off the rest of their debts.
Subchapter 5 allows business owners to basically force their creditors into accepting a repayment plan approved by the court. What’s more, they can also shed certain types of unsecured debt, greatly alleviating their current financial situation.
What should I know about Subchapter 5?
The basics of Subchapter 5 of Chapter 11 are only the, well, basics of what there is to learn about this form of bankruptcy before filing it or contacting the professionals to help you file it. It’s also important to explore some additional details that make this form different from others and more beneficial in certain situations.
Both individuals and small business owners can file for bankruptcy under Subchapter 5. However, this form of bankruptcy does require either the individual or the company to engage in a type of commercial activity other than a real estate company with a single-asset operation. Also, Subchapter 5 requires that at least half of the liabilities originate from business activity.
The debt limit for filing bankruptcy under Subchapter 5 of Chapter 11 is $2,725,625. However, the CARES Act was introduced during the pandemic to increase this limit to $7.5 million. This act lasted for one year, and ended, meaning that the original debt limitations still apply.
The owner of the small business may choose to spread the repayment of their debt by implementing a plan that lasts for as long as five years. This gives the debtor the time they need to fully recover from their financial troubles in a time span they prefer.
Traditional Chapter 11 bankruptcy can transpire both with or without a trustee. Subchapter 5, however, requires that a trustee is appointed for the bankruptcy. Even with the existence of a trustee, the debtor remains in full control of all their operations and assets.
Finally, Subchapter 5 generally goes into effect much faster than standard Chapter 11. The status conference begins no later than 60 days after filing, and the debtor is required to file a written report two weeks before the conference. This allows small business owners to get their finances back on track faster.
Where should I schedule a Subchapter 5 of Chapter 11 consultation in San Diego, CA?
There’s a lot you should know about Subchapter 5 of Chapter 11 bankruptcy before filing. Besides the basic details, you need to know what benefits you can expect from Subchapter 5. However, you should also compare it to Chapter 11 by getting more information about the basic Chapter 11 bankruptcy and what benefits you can receive from filing this standard bankruptcy. But why do it alone when you can enlist the help of professionals?
Bankruptcy Law Offices of Mark L. Miller is dedicated to a single mission – smoothly guiding you through the unknown waters of bankruptcy. We’re a collection of experienced and knowledgeable legal minds who are passionate about our work and pleasant to be around. But most of all – we’re here to assist you in regaining your financial independence easily and efficiently. Our offices are near Whaley Museum, so come for a free consultation.