What Is A Subchapter V Bankruptcy?

February 6, 2025

What Is Subchapter V Bankruptcy?

Subchapter V bankruptcy is a relatively new option designed to help small businesses reorganize their finances while continuing to operate. Part of the Bankruptcy Code, Subchapter V was introduced through the Small Business Reorganization Act of 2019. It provides a streamlined process that offers a more affordable and efficient way for small businesses to restructure their debts. If you're a business owner struggling with debt, Subchapter V may be a suitable choice to help you stay afloat and return to profitability.


How Does Subchapter V Bankruptcy Work?

Subchapter V offers an alternative to traditional Chapter 11 bankruptcy, focusing on small businesses with less complicated financial structures. In this process, business owners are given the opportunity to create a repayment plan for their debts, which typically lasts three to five years. Unlike Chapter 11, Subchapter V allows for more flexibility and a quicker resolution, making it an attractive option for small businesses looking to reorganize without incurring the costs and lengthy delays associated with traditional bankruptcy procedures.


Eligibility for Subchapter V Bankruptcy

To qualify for Subchapter V bankruptcy, a business must meet specific criteria. Generally, the business must have less than $7.5 million in debt, a threshold set by the Small Business Reorganization Act. This includes both secured and unsecured debts. The business must also be a for-profit entity that operates as a small business, rather than a large corporation. Additionally, Subchapter V is available to sole proprietors, partnerships, and corporations, provided they meet these debt limits.


Benefits of Subchapter V Bankruptcy

One of the major advantages of Subchapter V bankruptcy is the reduced costs and simpler process compared to traditional Chapter 11 filings. The streamlined process eliminates the need for a creditors' committee, and the court supervises the entire process with more frequent hearings. Business owners maintain more control over their operations, as they are responsible for drafting and submitting their repayment plan. Furthermore, Subchapter V offers greater flexibility in negotiating with creditors, which can lead to more favorable outcomes.


How Does Subchapter V Compare to Other Bankruptcy Options?

While Subchapter V bankruptcy shares similarities with Chapter 11, it is distinct in its focus on small businesses. Chapter 11 can be costly and time-consuming, often requiring extensive legal and financial resources. In contrast, Subchapter V is designed to offer a more efficient, lower-cost option for small businesses. Another key difference is that in Subchapter V, business owners retain more control over the reorganization process, as opposed to the more complex Chapter 11 structure.


If you’re a small business owner facing overwhelming debt, Subchapter V bankruptcy might provide a solution to restructure your financial obligations and continue operating. With its streamlined process, lower costs, and flexibility, it can be an ideal choice for businesses looking for a path to recovery. If you think Subchapter V bankruptcy could be the right option for your business, reach out to The De Leo Law Firm in Mandeville, LA, to explore your options and begin the process of regaining control of your business's future.

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November 1, 2023
Filing for bankruptcy can be a daunting and overwhelming process, especially when you’re not familiar with the legalities involved in the filing. Chapter 13 bankruptcy, in particular, can be quite complex and challenging to navigate without professional guidance. This is where the role of a competent and experienced bankruptcy attorney comes in. Bankruptcy attorneys are trained and knowledgeable about the intricacies of the bankruptcy process. In this blog post, we’ll delve into the importance of hiring a bankruptcy attorney, the benefits you stand to gain, and what exactly they do during the bankruptcy process.  1. Expert Legal Guidance and Advice: Filing for chapter 13 bankruptcy is not a decision that should be taken lightly. It is essential to ensure that you have all the necessary information before you make a move. This is where a bankruptcy attorney comes in. They provide expert legal guidance and advice, ensuring that you make an informed decision before filing. A qualified attorney has years of experience in handling complex bankruptcy cases, and they can review your financial situation, suggest viable options, and help you make the best decision. 2. Professional Representation and Advocacy: With a competent bankruptcy attorney on your side, you have an advocate who will represent you in court. They will work tirelessly to ensure that your rights are protected and that you get the best possible outcome. Bankruptcy attorneys understand the legalities involved in chapter 13 cases and can provide you with the best defense possible. 3. Reduction of Stress: Filing for chapter 13 bankruptcy can be an emotionally draining experience. However, with legal representation, your attorney will lift most of the burden off your shoulders. Your attorney will take care of all the paperwork, court filings, and communication with your creditors. This means that you will have more time to focus on yourself and your family, reducing your stress levels considerably. 4. Handling of Complex Paperwork: Filing for chapter 13 bankruptcy involves tons of paperwork that only a professional can manage effectively. Bankruptcy attorneys have been trained to handle these legal documents, ensuring that everything is in proper order, reducing the risk of errors, and speeding up the process. This also ensures that your case does not suffer any setbacks due to paperwork errors. 5. Negotiation with Creditors: One of the primary tasks of a bankruptcy attorney is to negotiate with your creditors. They will work with your creditors to come up with a repayment plan that suits your financial situation. Your attorney will ensure that you get a fair deal by negotiating lower interest rates, reduced monthly payments, extended payment plans, or even debt forgiveness, depending on your unique situation. Filing for chapter 13 bankruptcy in Louisiana can be intimidating, but with the help of a competent bankruptcy attorney, you can make the process more manageable. A bankruptcy attorney provides expert legal guidance, professional representation, and advocacy, reduces stress, handles complex paperwork, and negotiates with creditors on your behalf. Get in touch with a reliable bankruptcy attorney today and take your first step towards financial freedom.

Debt Limit Increased for New Chapter 11 Subchapter V

April 27, 2020
In February, 2020, a new Subsection V to Chapter 11 of the Bankruptcy Code became effective. As many of you are aware, Chapter 11 is generally used for the purpose of reorganization by businesses or by individuals whose debt exceeds the Chapter 13 debt limitation (below $394,725 in unsecured debt and below $1,184,200 in secured debt). Chapter 13 debt limits can easily be surpassed by individuals who have personally guaranteed business debt or have large student loans. The problem with Chapter 11 to small businesses and individuals is that it moves slowly and is very expensive as it was originally designed to reorganize large corporations. As an alternative, Congress finally passed a new Subchapter V which creates a shorter, more cost effective, stream-lined approach for small business and personal reorganization. As passed, individuals and businesses that qualify as a "small business debtor" are eligible for relief. To be a "small business debtor," the following criteria are required: (i) debtor is engaged in commercial or business activities; (ii) debtor has no more than $2,725,625 of non-contingent liquidated secured and unsecured debt; (iii) 50% of debt must have been generated from business or commercial activity; and (iv) the debtor cannot have as its primary activity the ownership of single asset real estate. Under the recently passed CARES Act, the debt limit for a Subchapter V entity has been increased, applicable only for 12 months since the passage of the Act, to $7,500,000. However, this only applies to Debtors filing their cases AFTER the passage of the CARES Act in March, 2020. The higher debt limit will help many small businesses and individuals who would otherwise been ineligible had the losses not occurred after the outbreak of COVID-19.

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How the COVID-19 Pandemic Affects Your Pending Bankruptcy Proceeding

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Every part of the country has been affected by the coronavirus. Like restaurants, arenas and other locations where people assemble for business or pleasure, most courts have been closed. If you are in the midst of a bankruptcy proceeding, your case might be delayed, handled telephonically or be otherwise disrupted due to the pandemic. Furthermore, as bankruptcy courts attempt to improvise solutions for debtors and creditors, the country’s economic upheaval indicates that the system might soon become overwhelmed. Regardless of what you hear on the news or from friends, don’t assume either that your case is definitely delayed or that it will remain unaffected, as courts typically make these decisions based on local conditions. However, you should be aware that potential impacts to your bankruptcy proceedings might include: Court closures — Many federal courthouses have been off limits for understandable reasons. In Detroit, a court was closed after a security officer tested positive for COVID-19, an example of local conditions preceding top-down decisions to close. You can check with your lawyer, call the court or see updates on closures in your state here . Telephonic creditors’ meetings — As the pandemic was spreading across the country, the U.S. Trustee ordered that Section 341 Creditors’ Meetings no longer be held in person. Depending on the specific COVID-19 restrictions in your area, Section 341 meetings might still be happening virtually. If you just filed recently, your notice should arrive in the mail shortly with a meeting date and possibly instructions for holding the meeting online or by phone. Payment and filing deadlines — Dates for filings and payments have not changed, and you should assume that the court will still require that all deadlines be met unless you have received a written notice informing you otherwise. In-person signatures — Normally, bankruptcy petitions require a “wet signature” — meaning pen-to-paper, in-person signatures. Depending on where you live and current social distancing restrictions, these requirements might be waived. Changes in the court system due to COVID-19 may differ from one locality to the next. Consult an experienced bankruptcy attorney to help you navigate constantly evolving processes and changing norms, so that you can emerge from bankruptcy as quickly and successfully as possible. Contact a dedicated bankruptcy lawyer to learn about your options [ln::firm_name] represents clients in bankruptcy proceedings and other debt relief matters. For a consultation regarding your case, please call [ln::phone] or contact the firm online.