Subchapter V Bankruptcy Your Trusted Legal Ally

What You Need to Know About Subchapter V Bankruptcy

Subchapter V is a streamlined, cost-effective reorganization process. This form of bankruptcy eliminates many of the obstacles that made Chapter 11 nearly impossible for small businesses.

Under Subchapter V, small business bankruptcy will NOT need to involve:

  • Disclosure statements
  • Creditors’ committees
  • Plan approval by creditors

The elimination of these requirements and procedures reduces both the time and cost of the entire filing process.

Additionally, Subchapter V does not enforce the Absolute Priority Rule, which would normally prevent you from retaining ownership interests unless all your creditors are repaid in full. Without the Absolute Priority Rule, you have a greater chance of keeping your business assets AND reducing your financial obligations.

How to Qualify for Subchapter V

To qualify as a small business under Subchapter V, you must owe no more than $2,725,625*, at least 50% of which was accrued through commercial or business expenses.

Like Chapter 13, Subchapter V will require you to make monthly payments for 3-5 years using all your disposable income. Once you complete this plan, you should become eligible for a debt discharge, in which the court cancels your legal obligation to repay certain debts.

*The maximum amount of debt you can owe while still qualifying for Subchapter V was temporarily increased to $7,500,000 under the Coronavirus Aid, Relief, and Economic Security Act. This threshold will return to $2,725,625 in March of 2021.

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