For many small business owners in San Diego, CA, facing surmounting debt can bring a significant amount of worry and stress. With traditional bankruptcy filings leaving these same businesses struggling to reorganize and survive, the Small Business Reorganization Act (SBRA) allows for a new Subchapter V filing that is designed to address the unique circumstances facing small businesses. Passed in February 2020, a small business with less than $2,725,625 in debt, or less than $7.5 million through March 2024, can take advantage of these new provisions as a part of COVID relief.
At Bravo Law, APC, we understand what your small business means to you and the impact the debt of the business can have on you and your family. Our bankruptcy attorneys have the skill and experience necessary to help you navigate these difficult circumstances and help you find the debt relief you need to reorganize your business through Subchapter V bankruptcy.
In a Chapter 11 bankruptcy case, a business will use its available assets to pay off creditors while agreeing to reorganization structures with them. Often, businesses lose some control of their organization in the process as they work to fulfill the debt. They may be required to liquidate their assets or use future profits to satisfy the monies owed. While Subchapter V has similar requirements, it takes into account that a small business may not have the same assets or resources available to overcome surmounting debt. The SBRA was created in order to allow these types of businesses to maintain operations and create a plan that fits the small business.
To qualify for Subchapter V bankruptcy, a small business must not only be under the debt limit, but the majority of the debt must be related to the commercial business activities of the company. The SBRA provides the following provisions for small businesses:
After petitioning for a Subchapter V bankruptcy, a debtor has up to 90 days to produce a reorganization plan. This plan, unlike Chapter 11, does not have to be approved or voted on by a committee of creditors. Sixty days after filing, the debtor will provide an update on the progress of the reorganization. After a plan is in place, a trustee will be appointed to ensure proper and on-time payments to creditors.
Subchapter V bankruptcy is a type of debt relief system that applies to small businesses. Passed in February 2020, the Small Business Reorganization Act allows small businesses to maintain operations while working to relieve their struggles in paying back their debts. The SBRA allows for provisions that better fit the needs of a small business as opposed to Chapter 11 for big businesses.
To qualify for Subchapter V, certain stipulations must be met. First, the person seeking Subchapter V must be a person. Secondly, that person must be engaging in business or commercial activities. Thirdly, they must have secured and unsecured assets that total less than $2.7 million or, through March 2024, less than $7.5 million.
In order to file for Subchapter V bankruptcy, the debtor must specifically state they are doing so. If they fail to acknowledge this, then the bankruptcy filing will be treated as a Chapter 11 case. When declaring the type of bankruptcy, the debtor must also provide balance sheets, statements of cash flow, operational statements, and federal tax returns.
Owning a small business is an exciting opportunity for anyone. Finding success, however, can be a long and complicated road. Even for businesses that are seeing profits, debts can continue to mount, making it difficult for the small business to get ahead. Under common Chapter 11 bankruptcy, many small businesses are left without the support they need to continue to operate while creating a plan to eliminate their debt. Subchapter V bankruptcy allows small business owners to continue to keep operational ownership of their company while having a plan to relieve their debts.
At Bravo Law, APC, your small business matters to us. Bankruptcy can be difficult and confusing, but with our team, we can help guide you through the process so that you can stay focused on growing your business and providing your customers with high-quality goods and services. Contact Bravo Law, APC, today, and let an experienced business lawyer help you.
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