The new part of the bankruptcy code is aimed at making reorganizing small businesses easier, more streamlined, and less costly. Read on to learn more.
How Is Chapter 11 Subchapter V Different?
The new Chapter 11 Subchapter V bankruptcy has many differences from a regular Chapter 11. For instance, some of the changes are as follows:
- Plan easier to confirm
- Only debtor can file plan
- Disclosure statement not required
- Contested plan may be confirmed over objecting impaired class
- Absolute priority rule not applicable
- No creditors committee
- No quarterly U.S. Trustee payments
These changes will result in faster and thus less expensive reorganizations for small business.
As such, your small business may use the new Chapter 11 Subchapter V to reorganize in this current economic climate. The use of Subchapter V may be one route to keeping your business going.
Traditionally, regular Chapter 11 bankruptcies have been expensive and the success rate of a company or individual making it through the life of the bankruptcy plan was much less than 50%.
Therefore, struggling businesses whose main debt consists of an SBA loan may find the new Chapter 11 Subchapter V bankruptcy a potential option to rescue the business.
The Biggest Change Results In The Ability To Modify A Lien On Your Home
Individuals may avail themselves of new bankruptcy procedures as well as small businesses. Most importantly, it may provide you with the opportunity to modify your SBA related loan.
If as part of your SBA loan, you pledged your primary residence as collateral, neither Chapter 7 or Chapter 13 bankruptcy will likely help in the event of default. However, Chapter 11 Subchapter V may help.
For instance, a small business debtor's plan may modify the rights of a holder of a claim secured by the principal residence of the debtor if the new value received in connection with the granting of the security interest was:
- not used primarily to acquire the real property; and
- used primarily in connection with the debtor's small business
Therefore, you could possibly use the Chapter 11 Subchapter V to save your house and modify the terms of repaying the loan if you pledged your house as collateral as part of your personal guarantee. You will, more than likely, not rid yourself of the lien. Preserving your home constitutes your goal with the new bankruptcy code. If you have no other options, you should explore the new bankruptcy option.
Contact Protect Law Group Today
San Diego County residents and small business that may benefit from a bankruptcy should contact us for a free initial consultation. Our attorneys can help you and your business.