What is a subchapter 5 in bankruptcy, and how does it differ from classic chapter 11 bankruptcy?

Subchapter 5 is a part of the Bankruptcy Code that was added in 2019 as part of the Small Business Reorganization Act (SBRA). It is a streamlined bankruptcy process designed specifically for small businesses with debts of up to $7,500,000.  The debt limit on this will likely change over time.

Subchapter 5 bankruptcy has similarities to a traditional Chapter 11 bankruptcy, but it also has significant differences. The goal of subchapter 5 is to make the bankruptcy process less expensive, faster, and more accessible to small businesses. This can be achieved in the right situation.  

Under subchapter 5, a small business debtor can file a plan of reorganization without having to obtain votes from creditors. Another difference is that subchapter 5 eliminates the possibility of a creditors’ committee. This can save the debtor money on legal and administrative expenses. Additionally, subchapter 5 provides for a trustee who has the statutory role of facilitating plan confirmation.  

Overall, subchapter 5 bankruptcy is a streamlined and accessible option for small businesses or individuals struggling with debt. It allows debtors to reorganize and emerge from bankruptcy with a plan curing certain secured claims, addressing tax liabilities, and discharging unsecured obligations that lead to a sustainable financial future.

At DiMarco Warshaw, our experienced bankruptcy attorneys will help determine your options and your best solution to resolve your debt challenges. Andy Warshaw is certified by the State Bar of California as a Specialist in Bankruptcy Law. Over the past 15 years he has helped over 1,000 clients protect their property through his bankruptcy services.

We can provide immediate assistance to help save your property and business, and will help eliminate the burden of stress you may be feeling from your debt. To speak to an attorney with your best interests in mind, schedule a free evaluation here https://calendly.com/dimarcowarshaw/20min or call us directly at 888-890-5474.