Recent expansions to Chapter 11 bankruptcy, specifically revisions to Subchapter V bankruptcy, are intended to help small businesses remain open and retain their employees and their customers.
- Save your business
- Hold onto your equity interests
- Get the leverage you need to reorganize your financial obligations and potentially renegotiate with creditors, lenders and landlords
- Use the reorganization plan to extend your property lease
- Improve your cash flow by spreading debt out over the next 3-5 years
CHAPTER 11, SUBCHAPTER V BANKRUPTCY – MARYLAND OVERVIEW
According to the U.S. Small Business Administration, there were over 600,000 small businesses within the state of Maryland in 2020, and 31.7 small businesses in the United States. These small businesses are responsible for the creation of a tremendous number of jobs, but they have also been subject to significant hardships during the recent pandemic. In Maryland alone, small businesses were responsible for employing 1.2 million people last year – representing nearly half of the state’s private workforce.
How Does Chapter 11, Subchapter V Bankruptcy Benefit Small Businesses?
The Consolidated Appropriations Act, 2021 (CAA) was enacted to address the continued economic fallout from the pandemic. This act includes provisions for small business bankruptcy relief through modifications to Subchapter V of the Chapter 11 Bankruptcy Code. Under the revisions, small businesses that experienced hardship due to COVID-19 and file for Chapter 11 bankruptcy prior to December 22, 2022 are eligible for the following benefits designed to improve their short-term cash flow and help them stay in business:
- The business may request to extend its payments over time by utilizing the reorganization plan.
- Only the filing business may request reorganization.
- The business may liquidate unsecured debt while still maintaining any equity interests.
- The business may request an extension to take up to 120 days to pay rent. Under the Subchapter V reorganization plan, the debtor may also repay any deferred amount over the course of several years.
- The business has 210 days to assume or reject property leases, and may request an additional 90 day extension from the court. This added time may be useful for renegotiating the terms of the lease or for finding another property with more favorable lease terms.
What Businesses Qualify For Chapter 11, Subchapter V Bankruptcy?
Recent modifications to Subchapter V of the Chapter 11 Bankruptcy Code were developed to assist small businesses – defined being involved in a commercial activity, having fewer than 1,500 employees and having no single real estate asset or debt that exceeds $7.5 million. Under the new revisions, small businesses with total debt over $7.5 million or actual claims of over $7.5 million (due to leases or contracts) can qualify to file for bankruptcy protection under Subchapter V.
What Is The Process For Filing For Small Business Bankruptcy Relief?
In order to best serve distressed small businesses, the Chapter 11, Subchapter V bankruptcy process is designed to be faster and less expensive than a traditional Chapter 11 bankruptcy.
If your Maryland small business is struggling due to the pandemic, you may be able to reorganize your debt without giving up your equity interest in your business. Subchapter V of the Chapter 11 Bankruptcy Code was modified specifically so that fewer small business will be forced to shut down their operations. Our Baltimore bankruptcy attorneys will meet with you personally and will take the time to fully understand your company’s historical and current financial situation. Subchapter V is an efficient and economical way for your small business to reorganize its debts. To take advantage of the Chapter 11, Subchapter V lifeline for small businesses, contact Jeffrey M. Sirody & Associates today at (410)834-4794 for a free consultation.
Is Your Small Business Struggling Due to the Pandemic?
If your Maryland small business is struggling due to the pandemic, you may be able to reorganize your debt without giving up your equity interest in your business. To take advantage of the Chapter 11, Subchapter V lifeline for small businesses, contact Jeffrey M. Sirody & Associates today at (410)834-4794 or schedule a free consultation online.