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Bach Is Your Financial Future.
555 Skokie Blvd Suite 250, Northbrook, IL 60062
PO Box 1285, Northbrook, IL 60062
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Every chapter of bankruptcy has its own purpose, set of benefits, and targeted filer. Chapter 7, for example, allows both individuals and businesses to liquidate assets and discharge most of their debt. Chapter 12, on the other hand, is very rarely used, and only family farmers and fishermen may qualify. Determining which chapter to file can be one of the most important decisions you make in the realm of bankruptcy.
In the late 1970s, Congress created Chapter 11 bankruptcy so companies could reorganize their debt and stay in business. For the last four decades, however, this chapter has only been feasible for corporate entities. Small businesses haven’t been able to afford all associated costs or obtain plan approval from creditors. As a result, many have been forced to liquidate through Chapter 7, as the Chapter 13 repayment plan is only available to individuals and sole proprietors.
Fortunately, Congress realized that Chapter 11 has only benefited large businesses and corporations. In August of 2019, legislators passed the Small Business Reorganization Act, which added Subchapter V to Chapter 11. The subchapter became available in February of 2020.
Subchapter V of Chapter 11 is an expedited, cost-effective reorganization path that is exclusively available to small businesses. More specifically, a company qualifies as a small business if it owes no more than $2,725,625*, at least 50% of which was accrued through commercial or business activities.
*COVID-19 UPDATE: Per the CARES Act, the debt threshold for Subchapter V is $7,500,000 until March of 2021.
Subchapter V provides several benefits for small businesses, including:
As with all new laws, only time will tell how successful Subchapter V may be for small businesses. On paper, however, this process is significantly more efficient and streamlined, and it will likely help countless business owners save their companies from liquidation.
Because of the COVID-19 pandemic, many small business owners are considering filing bankruptcy. If you are experiencing this level of financial hardship, our team at the Bach Law Offices, Inc. can assess whether you may benefit from Subchapter V of Chapter 11 bankruptcy. We want to help you and your business survive the financial impact of the coronavirus, and we have the skills and knowledge needed to do so.