Subchapter V Business Restructurings
While Chapter 11 can provide extraordinary relief in terms of reducing debt and increasing cash flow, the costs and burdens have traditionally been prohibitive for smaller businesses. That changed with the Small Business Reorganization Act (SBRA) that went into effect in 2020. The SBRA created a new streamlined version of Chapter 11 called Subchapter V (sometimes written as Subchapter 5).
Companies are eligible for Subchapter V if total debt does not exceed $7.5 million (not including disputed, contingent or unliquidated debts). If a business needs to restructure its debts, and it qualifies for Subchapter V relief, there is little reason to consider filing a traditional Chapter 11 case.
Individuals who are engaged in business or commercial activities are also eligible for Subchapter V relief. The benefits can be substantial for a business owner who has guaranteed company debts or used home equity to finance a business.
Our Nashville Subchapter V attorneys can help determine if you or your business would benefit from a streamlined Chapter 11 case, or whether out-of-court restructuring options make more sense.