Subchapter V Bankruptcy Attorneys in Greensboro and Durham NC
Subchapter V – Small Business Reorganization Act
When debt threatens the future of your small business, liquidation is not always the best or only option. Subchapter V bankruptcy was created specifically to help small businesses reorganize, reduce financial pressure, and continue operating while working toward long-term stability.
Subchapter V is part of Chapter 11 bankruptcy and is formally known as the Small Business Reorganization Act. It simplifies the traditional Chapter 11 process and makes reorganization more accessible and affordable for qualifying small businesses and individuals engaged in business.
Our Subchapter V bankruptcy attorneys in Greensboro and Durham help business owners understand whether this option is available and guide them through every step of the process.
Understanding Subchapter V Bankruptcy and the Small Business Reorganization Act
Subchapter V was enacted through the Small Business Reorganization Act, which was signed into law in August 2019 and took effect in February 2020. The purpose of the law is to make Chapter 11 bankruptcy more practical for small businesses.
Before Subchapter V, many small businesses could not afford or did not qualify for traditional Chapter 11 reorganization. Subchapter V removes several barriers, streamlines the process, and focuses on helping businesses survive rather than shutting down.
This form of bankruptcy is designed to preserve jobs, protect business value, and allow owners to remain actively involved in operations while restructuring debt.
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Who Is Eligible for Subchapter V Bankruptcy in Greensboro or Durham
Subchapter V is available to business entities and individuals engaged in business or commercial activity. To qualify, the debtor must have non-contingent, liquidated secured and unsecured debts that do not exceed the applicable debt limit.
Originally, the debt limit for Subchapter V was set at $2,725,625. Congress temporarily increased the debt limit to $7,500,000 in response to economic conditions related to COVID-19. Eligibility depends on the debt limits in effect at the time of filing.
Subchapter V is not available to businesses whose primary activity is owning or operating single asset real estate.
A Subchapter V bankruptcy attorney can help determine whether your business qualifies under current law.
How Subchapter V Bankruptcy Works
Subchapter V follows the structure of Chapter 11 bankruptcy but with important simplifications. The debtor remains in control of the business as a debtor in possession and works toward proposing a reorganization plan.
Unlike traditional Chapter 11, the debtor is the only party permitted to file a plan under Subchapter V. The plan must generally be filed within 90 days of the bankruptcy filing unless extended by the court.
A Subchapter V trustee is appointed to oversee the process, facilitate negotiations, and ensure compliance. However, the trustee does not take control of business operations.
The goal is to confirm a feasible plan that restructures debt while allowing the business to continue operating.
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What Subchapter V Bankruptcy Can Help Accomplish
Subchapter V allows small businesses to address a wide range of financial challenges. It can be used to restructure secured and unsecured debt, address tax obligations, modify certain mortgages, and manage lease and contract obligations.
In many cases, expenses can be paid over the life of the plan rather than upfront. This flexibility can significantly improve cash flow during reorganization.
Subchapter V may also allow for an earlier discharge of debt once plan obligations are met.
Key Benefits of Subchapter V Bankruptcy
Subchapter V offers several advantages over traditional Chapter 11.
The absolute priority rule does not apply, allowing business owners to retain equity even if creditors are not paid in full.
- Only the debtor may file a reorganization plan, reducing delays and conflicts.
- Administrative expenses are reduced, making the process more affordable.
- Plan payments may be spread over time rather than paid immediately.
- Post-confirmation plan modifications may be allowed.
- The automatic stay immediately stops collection efforts, lawsuits, foreclosures, and repossessions.
- Certain mortgages on principal residences used for business purposes may be modified.
- In some cases, an earlier discharge of debt is possible.
- Vehicle loans are not subject to cramdown in Subchapter V.
These benefits make Subchapter V an attractive option for many small business owners in Greensboro and Durham.
Potential Challenges of Subchapter V Bankruptcy
While Subchapter V simplifies reorganization, it still requires careful planning and commitment.
- The debtor must propose a feasible plan within a relatively short timeframe.
- Ongoing financial reporting and transparency are required.
- Court approval is necessary for plan confirmation.
- Not all businesses qualify based on debt limits or business structure.
Working with an experienced Subchapter V bankruptcy attorney is critical to navigating these requirements successfully.
Frequently Asked Questions About Subchapter V Bankruptcy in Greensboro and Durham NC
Subchapter V is a streamlined form of Chapter 11 bankruptcy created specifically for small businesses and individuals engaged in business. It allows qualifying debtors to reorganize debt while continuing operations.
Subchapter V simplifies the Chapter 11 process by reducing costs, eliminating the absolute priority rule, limiting who can file a plan, and appointing a trustee to assist rather than control the case.
Businesses and individuals engaged in commercial activity may qualify if their secured and unsecured debts fall within the applicable debt limit and the business is not a single asset real estate operation.
Yes. Filing for Subchapter V triggers an automatic stay that stops lawsuits, collection efforts, foreclosures, and repossessions.
In most cases, no. Business owners typically remain in control as debtors in possession while working with a Subchapter V trustee.
The timeline varies, but the debtor generally must file a plan within 90 days. The total length depends on plan confirmation and implementation.
Subchapter V focuses on restructuring debt rather than immediate elimination. Some debts may be discharged after plan completion, depending on the terms of the confirmed plan.
Subchapter V is complex and involves strict deadlines and requirements. Working with an experienced Subchapter V bankruptcy attorney in Greensboro or Durham is strongly recommended.
Why Work With a Local Subchapter V Bankruptcy Attorney in Greensboro or Durham
Subchapter V bankruptcy involves both legal and financial strategy. Local experience matters. Attorneys who regularly practice in Greensboro and Durham understand local court procedures, trustee expectations, and regional business considerations.
This local insight helps streamline the process and improves the likelihood of a successful reorganization.
Speak With a Subchapter V Bankruptcy Attorney in Greensboro or Durham NC
If your small business is struggling with debt but still has the potential to succeed, Subchapter V bankruptcy may provide the structure and protection you need to move forward.
Contact our office today to speak with a Subchapter V bankruptcy attorney and learn whether this option is right for your business in Greensboro or Durham, North Carolina.