3 Benefits Of Subchapter V Bankruptcies

In February 2020, a new bankruptcy law went into effect. The Small Business Restructuring Act of 2019 (SBRA), which is also being referred to as Subchapter V, created a bankruptcy process designed specifically for small businesses. 

Under the law, debtors can pay off creditors over a three to five-year period through a payment plan based on projected disposable income. At Hanson & Payne, we work with both debtors and creditors. Our role in a Subchapter V case is to lobby the trustee on behalf of our client so the trustee will recommend a plan that benefits our client. To do so, we work with our client to put together what we would consider an ideal plan, then gather all of the evidence that supports that plan. 

The Repayment Plan 

The third thing that sets Subchapter V apart is its repayment plan. This is not something you typically see in other business bankruptcies, but it is common in a Chapter 13 personal bankruptcy. 

The big issue in Subchapter V cases is what counts as disposable income since that is the money that is earmarked for repaying creditors. The pandemic has made this a challenging task since cash flow has been so irregular during the past year. The Hanson & Payne team helps debtors and their creditors determine a fair way to calculate disposable income. 

Milwaukee Bankruptcy Lawyers Small Business Owners Can Rely On

At Hanson & Payne, we are eager to help small business clients who feel the Subchapter V process may be just what they need to survive and thrive post-pandemic. Whether you know Subchapter V is what you want to do, or you are open to other options, our business-savvy team is ready to advise you and guide you along whatever path you choose. If you are looking for legal counsel in this challenging time, we would be honored to take your call. Contact us today to schedule an initial consultation.

Businesses a bankruptcy option that is like a hybrid of a traditional Chapter 11 business bankruptcy and a Chapter 13 personal bankruptcy. This has been a real boon to small businesses here in Wisconsin and across the country during the economic downturn caused by the pandemic. 

There are three big things that set Subchapter V apart:

  • It provides shorter deadlines for completing the bankruptcy process
  • It provides for a private trustee who will work with the small business debtor and its creditors to facilitate the development of a consensual plan of reorganization, and 
  • Creditors are repaid through a court-supervised repayment plan. 

Shorter Deadlines 

Under Subchapter V, businesses have only a 90-day window to submit a reorganization plan to the court. Compare this to the 120-day deadline in Chapter 11 cases, which is often extended for periods up to 18 months. The difference is remarkable, and businesses are getting through the Subchapter V process remarkably fast. 

The law also requires the court to convene a status conference within 60 days of the filing date. 14 days before this conference, the debtor must file a report with the court detailing its progress towards reorganization. These deadlines really speed up the resolution by keeping the court and all of the parties interested in the case hopping. 

The speed cases get resolved is important because bankruptcy filers must pay ongoing administrative fees and expenses. As cases drag on, these amounts can really add up and become a burden on an already cash-strapped business. 

The Role Of The Trustee 

As soon as a Subchapter V case is filed, the United States trustee (UST) will appoint a Subchapter V trustee to the case. The trustee is tasked with facilitating the development of a consensual plan of reorganization. This is a very hands-on job.