Subchapter V - an Alternative for Small Business Bankruptcy
We have a guest blogger on Direct Talk today - James C. White, Attorney at J.C. WHITE LAW GROUP PLLC
In February, the Small Business Debt Reorganization Act amended Chapter 11 of the US Bankruptcy Code by creating Subchapter V, an alternative route for small businesses bankruptcy. Chapter 11 reorganization seeks to help debtors with unbearable debts by reorganizing liabilities without liquidating the company. Chapter 11 bankruptcy has traditionally been a difficult path for small businesses because it can be complex, expensive, and lengthy. However, Subchapter V was designed to help small businesses in bankruptcy by giving the debtor more control, streamlining the bankruptcy process, and granting the debtor a trustee that is an ally. Subchapter V makes Chapter 11 bankruptcy smarter, faster, and cheaper, allowing small businesses to potentially save their businesses by reorganizing under Chapter 11. The timing of Congress’s enactment of Sub V is fortuitous for the many small businesses impacted by the COVID19 crisis.
More Control for the Debtor
Subchapter V contains several provisions designed to keep the small business debtor in control of its business and the reorganization process. A Chapter 11 debtor is considered a “debtor in possession” and is thereby allowed to operate the business during bankruptcy and keep its business upon discharge of all debts. However, in standard Chapter 11 cases, a trustee can take control over the business and bankruptcy process if there are serious questions about how the business is being run. Subchapter V changes the role of any appointed trustee to keep the debtor in control of the bankruptcy process and the company’s operation. Specifically, Subchapter V gives the debtor sole responsibility for developing a repayment plan for the debts, loosens the requirements for court confirmation of the repayment plan, and allows the debtor to keep its business when the repayment plan is complete, even if all the debts have not been settled.
A Faster and Cheaper Process
Subchapter V also creates a faster and cheaper reorganization process by amending the procedural provisions of Chapter 11. Subchapter V reduces costs by eliminating bureaucratic committees of unsecured creditors, streamlines the bankruptcy process by removing the requirement for the debtor to file a burdensome disclosure statement, and expedites the procedural timeline by instituting shorter filing deadlines. Additionally, other provisions create a more efficient bankruptcy process by mandating the debtor file a report and that the parties meet for a status conference. Though the report and status conference are added procedures, they are designed to ensure the repayment process runs as smoothly as possible. Finally, Subchapter V directly reduces costs by eliminating trustee fees.
A Trustee That is an Ally
During a Subchapter V reorganization proceeding in North Carolina, the office of the Bankruptcy Administrator will appoint a trustee to help facilitate the confirmation of a repayment plan and generally supervise the case. Unlike, trustees under other bankruptcy chapters, the Subchapter V trustee is not charged with investigating the debtor. Rather, a Subchapter V trustee is a small business debtor’s ally and is generally only responsible for facilitating an efficient reorganization process.
James C White helps people and companies facing serious financial injury by bringing and defending lawsuits and representing debtors in bankruptcy. He has successfully taken on banks, large financial institutions and other corporations in “David v. Goliath” cases. He has been recognized by his peers as one of the top civil litigation lawyers in the state (in Super Lawyers) as well as one of the top business bankruptcy lawyers in the state (in the Legal Elite).
North Carolina Lawyers Weekly named him a Leader in the Law recognizing him as an influential individual within the state’s legal community.
James C. White
J.C. WHITE LAW GROUP PLLC 100 Europa Drive, Suite 401 Chapel Hill, NC 27517
919-794-6724 direct line 919-246-4676 main line https://jcwhitelaw.com/