Standing Tall When It Matters Most

New Subchapter V amendments

A small business owner in Texas may deal with a company suffering from substantial losses. Financial problems might become so severe that the owner considers filing for bankruptcy. Subchapter V of the federal Chapter 11 bankruptcy code made the process less challenging for small businesses, and new permanent amendments to the subchapter could further reduce costs and stress.

Subchapter V amendments

Subchapter V of Chapter 11 bankruptcy came into existence to help small business owners with their enterprises’ reorganization. Requiring small business owners to follow the same rules and requirements of large corporations proved onerous to many entrepreneurs. So the Small Business Reorganization Act of 2019 established less complicated and more reasonable procedures for a small business to undergo bankruptcy proceedings.

Laws are subject to revisions, and current permanent amendments changed elements of Subchapter V rules. The changes state debtors no longer face requirements to file monthly income statements, place new rules on creditors, remove conditions for debtors to provide complete property inventories and more.

Reorganizing debt

Chapter 11 bankruptcy focuses on reorganizing a business’s debt and developing an effective payment plan. Chapter 11 provides an alternative to Chapter 7 liquidation bankruptcy, allowing the company to remain in business. The governing principle centers on letting the company continue to operate, so its revenues may compensate creditors via a payment plan.

Filing for Chapter 11 could give a business owner a chance at a fresh start. Besides establishing a repayment plan, the bankruptcy court might discharge specific unsecured debts. Once discharged, the debtor no longer must pay those obligations. A reduced debt burden could help the business owner move forward without the strain of trying to cover debts he or she cannot pay.