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Chapter 11 News & Notes: Subchapter V Takes Effect

Small Business Reorganization Act and Subchapter V of Chapter 11 Takes Effect February 19, 2020

This major revision to the Bankruptcy Code aims to streamline small business Chapter 11 cases with a new provision called Subchapter V. Small business debtors that elect to proceed under new Subchapter V can benefit from several important changes relating to plan confirmation, including: (1) only the debtor can file a plan (i.e. perpetual exclusivity); (2) the debtor can combine the hearing on its disclosure statement with plan confirmation; (3) the plan can modify loans secured by a primary residence (if not obtained for the purchase); (4) no need for an impaired accepting class; and (5) old equity can retain their interests if projected disposable income is used to pay claims. The Act dispenses with committees in small business cases, but calls for appointment of a "Small Business Trustee" to facilitate plan confirmation and be a conduit for plan payments.


US Corporate Debt Hits All Time High

Debt held by US companies has grown rapidly since the Great Recession and now stands at a record high $15.5 trillion, equal to 74% of US GDP. Excessive debt is a major risk factor for financial distress. Fueled in no small part by historically low interest rates, economists are concerned that many businesses will get squeezed when rates inevitably rise.


Retailers, PG&E Top List of Largest 2019 Chapter 11 Filings

2019 has been a tough year for retailers with more than 8,000 stores expected to close amid a slew of bankruptcies, including Forever 21, Gymboree, and Payless Shoes. The largest Chapter 11 filing of 2019 belongs to PG&E, which sought bankruptcy protection in the aftermath of devastating California wildfires. The company lists $71.4 billion in assets, and estimated claims exceeding $30 billion from the wildfires alone.


EmergeLaw, PLC - Nashville Chapter 11 Attorneys

About EmergeLaw, PLC

EmergeLaw is a boutique law firm that represents small and middle market businesses and their owners in debt workouts, Chapter 11 reorganizations, Subchapter V restructurings, and other proceedings to help them deleverage and reposition for future success. Applying decades of experience and a specialized toolkit, our Nashville business restructuring attorneys help entrepreneurs, family businesses, private equity funded companies, and real estate investors maximize value in ways that many clients find unexpectedly efficient and effective.


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