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Top benefits of Chapter 11, Subchapter 5 business bankruptcy

| May 18, 2021 | Chapter 11 |

Many small businesses in Florida struggle to keep their doors open during economic downturns. They want to save their business, but a traditional Chapter 11 bankruptcy may fail to meet their needs. Those who haven’t been able to benefit from a Chapter 11 and were left struggling may now have an acceptable solution for addressing the need to reorganize their debts.

In 2019, Congress enacted the Small Business Reorganization Act, or SBRA, to offer alternative options for small businesses. The SBRA works under Subchapter 5 of the Chapter 11 bankruptcy reorganization plan.

To be eligible, small businesses must owe no more than $2.75 million in debt. For this debt to qualify, it cannot be owed to company insiders, and at least half of the debt must be associated with business activities.

What are some of the benefits of a Subchapter 5 filing?

A top advantage of this type of bankruptcy is that it can streamline the process of reorganizing debts for small businesses. Other benefits include the following.

  • A court can confirm your reorganization plan without the approval of your creditors.
  • You can continue to operate your business under a Subchapter 5 plan.
  • It allows you to spread the associated administrative costs over the duration of the plan.
  • You do not have to file detailed disclosure statements when you’re seeking a Subchapter 5 bankruptcy plan.

Although Subchapter 5 streamlines and simplifies Chapter 11 bankruptcy, it remains a complicated process. To learn more about your business’s eligibility, consider seeking counsel from an experienced attorney. They can play a critical role of guidance and advocacy throughout the process of reorganizing their business-related debts.