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Small Business Bankruptcy Lawyer in Aurora

Working Subchapter V of Chapter 11 to Your Advantage

In February of 2020, the Small Business Reorganization Act (SBRA) added Subchapter V to Chapter 11 bankruptcy. Congress passed this act to address the difficulties small businesses have had when attempting to file Chapter 11. Under Subchapter V, small businesses have access to a streamlined procedure that is more efficient and less expensive than traditional Chapter 11. As a result, countless small companies can now successfully restructure and keep from going out of business.

If your small business is no longer profitable because of overwhelming debt, we urge you to call Consumer Law Pro. Our firm has provided skilled bankruptcy support to small businesses like yours for more than a decade. We can help you by closely analyzing your financial situation and determining whether Chapter 11 bankruptcy is right for you.

With qualified support, you may be able to use Subchapter V to save your small business from liquidation. Call Consumer Law Pro at (303) 622-3833 or contact us online to learn more.

What Is Subchapter V?

Chapter 11 bankruptcies have long been associated with multi-million-dollar corporations, allowing them to reorganize their debt while remaining in operation. This type of bankruptcy was not necessarily designed with small business owners in mind.

The SBRA is an attempt to remedy this inequity and make the process more accessible to small business owners. Subchapter V is only available to businesses with less than $2,725,625* of secured and unsecured debt.

*COVID-19 NOTICE: Per the CARES Act, the debt threshold is $7,500,000 until March of 2021.

The following are a few major highlights of Subchapter V.

Appointment of a Trustee

While the small business owner continues their business operations, the bankruptcy court appoints a trustee. The trustee’s role is not to run the daily operations or liquidate assets but to help the company develop a feasible reorganization plan, participate in the plan, and oversee the reimbursement of creditors.

No Creditors’ Committees

Under Subchapter V, only the debtor can propose and submit a reorganization plan. Disclosure statements are eliminated, and creditors’ committees will not be required. Without competing plans from creditors, contested hearings will not be necessary, thus reducing associated costs. You must generally file your plan within 90 days of filing your original bankruptcy petition.

Reasonable Repayment Plans

Generally, the rules for reorganization plans under Subchapter V are less stringent than in traditional Chapter 11 filings. So long as your repayment plan is fair and equitable, you can retain ownership of your business and obtain plan approval from the court. All your projected disposable income must be used to make payments over the life of the plan (3-5 years, like Chapter 13).

Potential Modification of Residential Mortgages

You may be permitted to modify your residential mortgage as long as the mortgage was not used to purchase the residence. For example, if you borrowed money against a free and clear house to invest in your small business, you can now modify that lien under Subchapter V.

Find Out if You Qualify for Subchapter V

As a small business owner, you may have been hard hit by the recent Covid-19 crisis or by some other business-related calamity. You may find your business drowning in debt and unable to resolve the matter on your own. If so, we strongly urge you to take advantage of our legal skills and experience with bankruptcy for small business owners. We can explain how Subchapter V may work for you during this difficult time and help you move toward a more prosperous future.

Contact our small business bankruptcy attorney in Aurora through our online request form or by calling (303) 622-3833 today.

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