Taking Advantage of Small Business Bankruptcy Protection

Until just two years ago, small businesses that ran into financial trouble couldn’t find much protection in the bankruptcy system. Reorganization under Chapter 11 was too expensive and filing for Chapter 7 would mean going out of business. Fortunately, today there is another, more useful bankruptcy option known as Subchapter V — a slimmed-down version of Chapter 11 that removes many of the financial and administrative obstacles that used to make that avenue of relief impractical.

Subchapter V, enacted in early 2020, can be a wise choice if your small business qualifies for using it. Georgia small businesses may be eligible for Subchapter V if they meet the following criteria:

• The business is still operating at the time of filing.
• Most of the debt involved is business debt, not the personal debt of the owner.
• The owner intends to reorganize the business and keep it operating after emerging from bankruptcy.
• The company’s total debt is less than $2.7 million.

The advantages of Subchapter V include the following:

• You can repay part of your unsecured debt over three to five years while keeping your business running.
• There are no quarterly fee payments to the U.S. trustee.
• There is no unsecured creditors’ committee, saving you the cost of paying for the committee’s lawyers
• You can retain your interest in the company without needing to add new capital.
• You are the only one with the right to propose a reorganization plan; creditors cannot propose their own plan.
• As long as your plan treats all creditors equitably, the bankruptcy judge can approve the plan even if creditors don’t all agree.
• Upon completion of the repayment plan, your remaining unsecured debt is discharged.

Seeking Subchapter V relief requires filing a Chapter 11 petition and choosing Subchapter V. After filing, you’ll submit a balance sheet, statement of operations, and a variety of other business documents to the court. Finally, you must submit your reorganization plan no later than 90 days after filing your petition.

Jeff Field & Associates has helped many Atlanta-area small businesses take advantage of Subchapter V as a more economical and efficient way to reorganize debt and return to profitability. Our attorneys are ready to assist you. Please call 404-381-1278 or contact us online to schedule a meeting at one of our offices in Bogart, Douglasville, Gainesville, Lawrenceville, Marietta or Decatur.