Wednesday, May 11, 2022

SubChapter V Bankruptcy for Small Business an Update

 SubChapter V, the new small business chapter 11 bankruptcy is approximately 2 years old. Congress’s goal was to create a less costly form of  reorganization for small businesses.  For many small businesses, Chapter 11 filings were too expensive. SubChapter V combines elements of chapters 13 (which is only for individuals) and 11.

We wrote about SubChapter V on our blog at https://shenwick.blogspot.com/search?q=subchapter+v

A recent article at Bloomberg titled “Analysis: Four Statistical Snapshots of Subchapter V’s 1st Year can be found at  https://news.bloomberglaw.com/bloomberg-law-analysis/analysis-four-statistical-snapshots-of-subchapter-vs-1st-year

The Bloomberg article states that since the first case was filed in the Middle District of Tennessee on Feb. 19, 2020, a total of 1,643 bankruptcies were filed pursuant to Subchapter V.

 The Middle District of Florida had the most Subchapter V cases filed during its first year with more than 140 cases.  Florida, California, and Texas rounded out the top five.

According to the article, approximately 50 Subchapter V cases were filed in the SDNY and 50 in the EDNY.

A recent article at JD Supra titled Subchapter V Changed The Chapter 11 Bankruptcy Landscape – How Should A Creditor Protect Itself? Which can be found at https://www.jdsupra.com/legalnews/subchapter-v-changed-the-chapter-11-1845098/  details how creditors can protect themselves if they are involved in a Subchapter V case.

At Shenwick & Associates, we filed one Subchapter V case and then quickly moved to convert that case to chapter 7 due to, in our opinion, a difficult to deal with and inexperienced Subchapter V Trustee. Unfortunately SubChapter V requires that a Subchapter V Trustee be retained in the proceeding and the Debtor has no control over who that trustee will be.

Subchapter V remains a work in progress and only time will tell if this new version of chapter 11 will be successful!

Attorneys, accountants or debtors who have questions about Subchapter v or small business reorganizations should contact Jim Shenwick, Esq 212 541 6224   jshenwick@gmail.com


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