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Chapter 11 Subchapter V Bankruptcy for Small Businesses:

Chapter 11 for Small Businesses: Subchapter V

In recent decades, small businesses have not seen the same number of benefits from Chapter 11 as their corporate counterparts. Chapter 11 has been too expensive and too complex for small business owners, and many of them have been forced to liquidate their businesses through Chapter 7 instead.

There could not have been a better time for Chapter V to have been enacted by Congress. The COVID-19 Pandemic has ravaged small businesses, and Chapter V may be the lifeline that could save your small business from closing.

Congress passed the Small Business Reorganization Act of 2019, which took effect in February of 2020. The act created Subchapter V within Chapter 11, a subchapter that is exclusively available to small businesses.

If you file under Subchapter V, you can experience the following benefits:

  • Minimized time and cost of reorganization
  • The opportunity to propose the repayment plan yourself
  • No need to obtain approval from creditors
  • No creditors’ committee or disclosure statements
  • Potential mortgage modification of your primary residence

To qualify as a small business, you must have no more than $2,725,625 of debt*, at least 50% of which must have been accrued through business or commercial activities.

*COVID-19 NOTICE: Per the CARES Act, the debt threshold for Subchapter V is $7,500,000 until March 27, 2021.

If you are having issues with a Merchant Cash Advance ("MCA") or Small Business Administration Business loan, we also negotiate with those entities to reduce or eliminate those debts outside bankruptcy. We also defend these threats through litigation outside bankruptcy. See our previous blog post on MCA's here

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Glenn F. Russell Jr. & Associates P.C. is here to help. No matter what your financial situation is, our compassionate and knowledgeable team will help you understand your options and will guide you toward a future without debt. Contact us for more information