Subchapter V

Subchapter V is a recently created form of bankruptcy available to business and individuals with predominately business debts, a “sub V” is a subset of a Chapter 11 restructuring that results in a faster bankruptcy process and typically results in a court-approved plan for the restructuring of debts through payments over three to five years.

Understanding Subchapter V Restructuring for Businesses

As in a typical Chapter 11 restructuring, businesses or individuals with primarily business debts have the option of selling off assets to reduce debts, funding a reorganization plan with future income or conducting a liquidation of desired assets. A Subchapter V restructuring also has many of the same rules and requirements of Chapter 11. The plan of reorganization must be feasible and fair, filed in good faith, and in the best interest of creditors.

A business or individual filing a Subchapter V restructuring gains the protection of the bankruptcy court and receives often much-needed temporary breathing room from creditors.

Advantages of Subchapter V Restructuring for Businesses and Individuals

A Subchapter V case has several unique advantages over a typical Chapter 11, designed to result in a quicker and sometimes less contested restructuring. The attorneys at Jones & Walden have written extensively on the requirements and benefits of Subchapter V. Our paper breaking down the process can be found here.

The requirements of Subchapter V are written to result in a faster bankruptcy process. For example, the plan of reorganization must be proposed within 90 days of the bankruptcy filing rather than the months a standard Chapter 11 may take. In a standard Chapter 11 restructuring, a business or individual is required to prepare two complex and lengthy documents known as a disclosure statement and plan of reorganization; Subchapter V simplifies this into a single plan of reorganization.

Subchapter V reorganizations are also structured to encourage plans that are agreed upon by debtors and creditors.  A Subchapter V restructuring includes a trustee who is required to work with the business and its creditors to come to an agreed upon plan of reorganization. The trustee can be helpful as a third party able to mediate the interests of the business and its creditors.

In both a standard Chapter 11 and a Subchapter V reorganization, creditors vote on the plan of reorganization proposed by the business. In a Subchapter V reorganization, the business does not have to obtain the vote of any creditors as long as it shows the proposed plan meets certain legal requirements, including submission of three to five years of disposable income to repay creditors.

Put Our Skill and Experience to Work for You

The highly experienced lawyers at Jones & Walden LLC were some of the first attorneys to present on the opportunities presented by Subchapter V to businesses and individuals with primarily business debts. The firm has filed some of the first Subchapter V reorganizations in Georgia, which builds upon decades of experience representing both borrowers and lenders in Chapter 11 cases throughout the State. Because of our diverse legal backgrounds and experience handling a wide variety of bankruptcy-related business and personal legal matters, we are sure we can help you resolve any issue, no matter how complex it may seem.

If you would like to learn more about Subchapter V reorganizations or other bankruptcy options to determine which is best for you, we encourage you to contact our Atlanta office. To schedule a consultation with an attorney, call 678-701-9235 or contact us online.