Individuals Families and
Small Business Owners
Chapter 11 bankruptcy is designed for businesses, providing assistance through opportunities to reorganize and continue operating. However, business owners often face challenges when filing for Chapter 11 due to the expense and procedural complications. Subchapter V of Chapter 11 of the Bankruptcy Code is a subsection that makes it a bit faster and less expensive to reorganize as a business debtor. At the Bankruptcy Center of Illinois, our attorneys assist in determining eligibility for Subchapter V, and providing representation throughout the process. As experienced bankruptcy lawyers, we understand the nuances of the Bankruptcy Code and are here to offer clarity.
Eligibility for Subchapter V extends to entities or individuals. Debtors elect to proceed under Subchapter V instead of regular Chapter 11 bankruptcy. Upon filing the petition for bankruptcy, a Subchapter V debtor provides the court a balance sheet, cash flow statement, statement of operations, and federal tax returns.
The bankruptcy court will appoint a trustee to oversee a bankruptcy under Subchapter V. The debtor’s assets are not controlled by the trustee, so the trustee does not have the right to sell them. Instead, the trustee serves a more passive role, as an advisor and handler. The trustee assists the debtor in developing a consensual reorganization bankruptcy plan and collecting payments. During major court hearings, the trustee typically makes an appearance.
The timeline of a Subchapter V bankruptcy is much quicker than traditional Chapter 11. After filing, the court holds a status conference within 60 days. Before that conference, the debtor reports their efforts to settle on a consensual plan. The deadline for filing a plan of reorganization is within 90 days of filing. This deadline may be extended, if the court determines that circumstances justifying extension were outside of the debtor’s control. It is important to note that the debtor alone may file a plan. In a regular Chapter 11, if the debtor does not file a plan within a set period of time, creditors or other parties have the option to file a plan.
Unlike Chapter 11, debtors filing under Subchapter V need not provide a disclosure statement. Typically a disclosure statement provides creditors the information necessary to assess and vote on a plan. Often, this leads to delays as the creditors and debtors may disagree. Alternatively, under Subchapter V, the plan covers a history of business operations, a liquidation analysis, and future projections that show the debtor’s ability to make intended payments under the plan.
Creditors vote on a plan in regular Chapter 11 bankruptcy Subchapter V is different; a debtor may confirm a plan even without the acceptance of creditors. However, the plan cannot discriminate unfairly, and it must be fair. The court approves the plan only if the creditors receive as much under the plan as they would if the business were liquidated.
The court typically requires that the debtor make all payments under the plan or that there is a reasonable likelihood all payments will be made. The plan must include certain remedies to protect creditors if the debtor does not make payments. If the plan is non-consensual, discharge occurs when the debtor completes all payments under the plan. A consensual plan leads to discharge at confirmation.
If you are in need of an effective and skilled bankruptcy attorney in DuPage County, the Bankruptcy Center of Illinois can help. For decades, we have assisted individuals and businesses facing financial challenges. Filing for Subchapter V under Chapter 11 bankruptcy may provide the relief and assistance that you need. Our commitment to our clients is to assess their specific situation and determine the best financial plan moving forward. To learn more, schedule a free consultation by calling (773) 993-0024 or contact us through our online form. We proudly assist people throughout DuPage County, as well as the larger Chicago area.