The Banker's Suit

NEW SUBCHAPTER V, SMALL BUSINESS BANKRUPTCY ACT GOES INTO EFFECT

Written by Elizabeth M. Lally | Mar 17, 2020 6:55:43 PM

The United States Bankruptcy Code has seen a lot of changes over the last year with the newest addition, Subchapter V coming online this week.

 The Small Business Reorganization Act of 2019, adds Subchapter V to the Bankruptcy Code’s existing Chapter 11 with the goals of cutting legal costs incurred by qualifying corporate debtors, defined as those with both secured and unsecured debtor of less than $2,725,625 (subject to inflation after April 1, 2021), expediting the restructuring process and allowing the debtor’s owners an easier method by which to retain an ownership interest in the reorganized business.

To proceed under Subchapter V, the debtor must make an election. Otherwise, the debtor's bankruptcy will continue as a "small business case" under Subchapters I through III of Chapter 11.

Subchapter V does not require a creditors' committee or disclosure statement except by court order for cause.

U.S. Trustee fees are not incurred. And, most importantly, the absolute priority rule has been eliminated. Bankruptcy can be complicated. If you need help understanding your rights in the bankruptcy process as a potential debtor-in-possession or as a secured or unsecured creditor, contact the experienced bankruptcy attorneys at Goosmann Law in our Sioux City, Sioux Falls, and Omaha offices.