--- title: Liquidating Business Assets Qualifies as Engaging in Commercial or Business Activities for Purposes of Subchapter V Eligibility description: Judge Vaughan held that the debtor was engaged in commercial or business activities on the petition date and was thus eligible for Subchapter V. image: https://blog.goosmannlaw.com/hubfs/money%20and%20gavel.jpg --- [![Goosman Lawfirm](https://blog.goosmannlaw.com/hs-fs/hubfs/Goosmannlaw%20October2017/images/Goosmann_Law_Firm_logo_4C-white.png?width=1250&name=Goosmann_Law_Firm_logo_4C-white.png "Goosman Lawfirm")](http://goosmannlaw.com/) - [COVID-19 Toolbox](https://goosmannlaw.com/covid-19-resource-toolbox/) - Our Team - [Attorneys](https://goosmannlaw.com/attorneys/) - [Non-Attorney Staff](https://http://goosmannlaw.com/non-attorney-staff/) - Practices & Industries - [Practices](https://goosmannlaw.com/practices/) - [Banking & Finance](https://goosmannlaw.com/banking-finance/) - [Bankruptcy, Restructuring & Workouts](https://goosmannlaw.com/bankruptcy-restructuring-workouts/) - 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[  (855) 843-4531](tel:855-843-4531) ![](https://blog.goosmannlaw.com/hubfs/Blog_Images/Lockbox%20Lawyer/close-button.png) [tel:855-THE-GLF1](tel:855-THE-GLF1) [Subchapter V](https://blog.goosmannlaw.com/banking-lawyer-on-you-side/topic/subchapter-v) # [Liquidating Business Assets Qualifies as Engaging in Commercial or Business Activities for Purposes of Subchapter V Eligibility](https://blog.goosmannlaw.com/banking-lawyer-on-you-side/liquidating-business-assets-qualifies-as-engaging-in-commercial-or-business-activities-for-purposes-of-subchapter-v-eligibility) By [Warren J. Ford III](https://blog.goosmannlaw.com/banking-lawyer-on-you-side/author/warren-j-ford-iii)   |  2, September 2021 [READ NOW](https://blog.goosmannlaw.com/banking-lawyer-on-you-side/liquidating-business-assets-qualifies-as-engaging-in-commercial-or-business-activities-for-purposes-of-subchapter-v-eligibility) [Read Post](https://blog.goosmannlaw.com/banking-lawyer-on-you-side/liquidating-business-assets-qualifies-as-engaging-in-commercial-or-business-activities-for-purposes-of-subchapter-v-eligibility#article) [![](https://blog.goosmannlaw.com/hs-fs/hubfs/Warren%20Headshot_Cropped_72dpi.jpg?width=60&name=Warren%20Headshot_Cropped_72dpi.jpg)](https://blog.goosmannlaw.com/banking-lawyer-on-you-side/author/warren-j-ford-iii) [Warren J. Ford III](https://blog.goosmannlaw.com/banking-lawyer-on-you-side/author/warren-j-ford-iii)  Tags: [Subchapter V](https://blog.goosmannlaw.com/banking-lawyer-on-you-side/topic/subchapter-v) In the case of *In re Vertical Mac Construction, LLC*, No. 21-1520 (Bankr. M.D. Fla. July 23, 2021), Vertical Mac Construction, LLC (“Debtor”) ceased operating its business after several lawsuits were filed against it for shoddy construction. The Debtor’s insurance carrier defended the lawsuits, but afterwards, the Debtor was unable to renew its insurance and therefore decided to close the business. Shortly thereafter the Debtor filed a petition under Subchapter V of Chapter 11. The petition listed approximately $300,000 in assets, including a $13,000 bank account. Immediately after filing bankruptcy the Debtor filed a motion to sell assets under 11 U.S.C § 363. However, before the Court could rule on the motion to sell the United States Trustee (“UST”) objected to the Debtor’s Subchapter V bankruptcy filing. The UST contended that the Debtor was not eligible to proceed under Subchapter V because the Debtor no longer operated a business and therefore was not “engaged in commercial or business activities” as of the bankruptcy filing date. The UST concluded that the Debtor is merely using Subchapter V to liquidate assets and not to reorganize a business. In February 2020, the Small Business Reorganization Act, became effective and is codified primarily in Subchapter V of Chapter 11 (11 U.S.C. §§ 1181 – 1195). To be eligible for Subchapter V, the debtor must have less than $7.5 million in debt and must be “a person engaged in commercial or business activities”. See Sections 1182(1) and 101(D)(A). Florida Bankruptcy Judge Lori V. Vaughan disagreed with the UST and held that a corporate debtor is eligible to sell the assets and liquidate in Subchapter V, even if the company had terminated normal operations before filing. Judge Vaughan concluded that “the plain meaning of engaged in ‘commercial or business activities’ is broad with a very inclusive range of commercial or business activity.” Judge Vaughn found that on the filing date, the Debtor was not operating. However, she found that the Debtor had bank accounts, was working with insurance adjusters to resolve claims, and was engaged in selling the business assets. “These acts were commercial or business in nature” and were being conducted “with a view toward profit, or at least minimizing loss,” Judge Vaughan said. By “maintaining bank accounts, working with insurance adjusters and insurance defense counsel to resolve the construction claims and preparing for the sale of its assets,” Judge Vaughan held that the debtor was engaged in commercial or business activities on the petition date and was thus eligible for Subchapter V. Judge Vaughn’s opinion sets an important precedent because it means that a business that ceases normal operations and is in the process of winding down the business, is eligible for Subchapter V because those winding down activities are commercial or business in nature. This opens the door for a defunct because to file Subchapter V with the sole purpose of proposing a plan of liquidation rather than reorganization. \*\*\*The Bankruptcy Code can be difficult to navigate. 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