Subchapter V Bankruptcy

The Small Business Reorganization Act of 2019:
An analysis of the new legislative H.R. 3311 Act enacted by Congress

Following the amendments made to the Bankruptcy code in 2005, small business debtors have continued to struggle amidst economic turmoil and persistent predatory lending practices that plagued their efforts to reorganize under Chapter 11 of the Bankruptcy Code. Finally after an outcry of from small business debtors to further amend the bankruptcy code on August 23, 2019 the Small Business Reorganization Act of 2019 was signed into law. In an effort to lower costs, and increase the speed of which Chapter 11 cases under the Bankruptcy code proceed, a new subchapter of Chapter 11 dubbed the Subchapter V was created that would apply solely to small business debtors with less than $2,725,625 taking into account certain exceptions of secured and unsecured debts.

What The Small Business Reorganization Act of 2019 Entails:

Facilitated Reorganization Process

The Subchapter V act looks towards the removal of procedural structure stopgaps that cause a burden by inflating the costs for small business debtors. This in effect makes reorganization for small business debtors more affordable by reducing the costs instead of excessive procedures. Subchapter V major changes include: small business debtors would no longer have to negotiate with creditors and relent to their demands during the vote soliciting process. Meaning that for Subchapter V debtors to confirm a plan or the approval of a separate Disclosure Statement, creditors would no longer have a role and would no longer be a roadblock. More importantly only the debtor would be able to propose a plan of reorganization. The act also removes the requirement that the debtor be responsible for paying administrative expense claims immediately and instead can now pay them over the time span of the plan.

Discharge Limitations

The Subchapter V act changes the limited exceptions to discharge as defined in section 1141. Instead the exceptions available to small business owners under Subchapter V are now applicable under Section 523(a) of the Bankruptcy code. The discharge would now relieve the debtor of personal liability for all debts in the plan except for: 1) on which the last payment is due after the first 3 years of the plan or as other time as fixed by the court (not to exceed five years) or 2) non-dischargeable debt.

Appointment of a Subchapter V Trustee

Chapter 11 Debtors would normally be their own trustees and be burdened with managing their own estate but with the subchapter 5 changes a trustee would be appointed. Similar to a Chapter 12 case under the Bankruptcy code, a trustee would be appointed to manage and facilitate the small business debtor's reorganization as well as to make sure that the debtor follows the reorganization exactly as it was presented in The Plan.

Removal of New Value Rule

The new Subchapter V provision removes the New Value Rule which required that any equity holders of the small business debtor provide "new value" to be able to retain equity interest. With the change in the New Value Rule, the equity holder will be able to retain their equity interest in the debtor without being forced to pay creditors off in full. The act changes the way plan confirmation used to work now requiring only that the plan is fair and impartial to the creditors. The act also takes a page from how Chapter 13 cases under the bankruptcy code function in that the debtor's projected disposable income will now be used to apply payments under the plan or the value of property to be distributed under the plan is not less than that the projected disposable income.

Allowance of Modifications for Residential Mortgages

Before the Subchapter V act individual business debtors were not allowed to modify their residential mortgages. That is no longer the case when the new Subchapter V act takes effect as mortgages secured by a residence can now be modified if the underlying loan was not used to obtain the residence as long as it is used mostly in connection to the debtor’s small business.

Chapter 7 bankruptcy is the fastest and easiest form of bankruptcy debt relief. If you are eligible, filing Chapter 7 bankruptcy will allow you to put an immediate stop to issues such as creditor harassment. You can wipe out your dischargeable debts and obtain a fresh financial start in about six months.

At the Orantes Law Firm in Los Angeles, Irvine and Woodland Hills bankruptcy attorney Giovanni Orantes is dedicated to helping consumers throughout Southern California near Inglewood andTorrance obtain debt relief by filing bankruptcy. We offer a free initial consultation to look at your financial situation and give you honest answers about your rights and options.

Our main website https://www.gobklaw.com/ provides more information about Chapter 7 bankruptcy, but below you will find some of the common issues people look to get rid of by filing for

Bankruptcy: Who is eligible to file Chapter 7 bankruptcy? The majority of people with significant debt problems are eligible to file Chapter 7 bankruptcy debt relief. Even if your earnings are too high to file Chapter 7, you can still obtain debt relief by filing Chapter 13 bankruptcy.

Creditor harassment: One of the main reasons people file Chapter 7 bankruptcy is to put a stop to creditor harassment.

Credit card debts: Credit card debt is 100 percent dischargeable under Chapter 7 bankruptcy.

Medical bills: One of the main reasons people file bankruptcy is to discharge medical debt.

Payday loans: Payday loans charge excessive interest and can quickly lead to overwhelming debt. Filing bankruptcy gives you a fresh start.

Tax debts: Some income tax debts can be discharged when you file bankruptcy.

Student loans and bankruptcy: Student loans are generally not dischargeable. Of course, “generally” means there are exceptions. One exception is when repaying the loan would create an undue hardship.

Auto repossession: Filing bankruptcy will stop an auto repossession and in some cases enable you to get your car back.

Wage garnishments: If a creditor has garnished your wages, filing bankruptcy will put an immediate stop to it.

CHAPTER 11 BANKRUPTCY

The usual goal of Chapter 11 bankruptcy is to put together a debt reorganization and repayment plan for businesses and individuals with both significant debt and significant assets. It provides protection from adverse creditor actions such as repossessions and lawsuits, and gives you the opportunity to turn your financial situation around.

For an operating business, to determine if Chapter 11 is an answer for your problems, you need to ask yourself whether your business would be viable if current unsecured and/or secured debts were paid a partial or full-distribution over time instead of having to pay under your creditors’ conditions. For an entity in the business of renting real property, the question is whether continuing to operate your rental properties can be made to result in a net gain every month by changing the terms of the notes secured against your properties, such as by extending the repayment term, paying only the current market interest rate for your type of property, and/or paying an amount equal to 100% with market interest of the current market value of your property but only an affordable percentage of the amount in excess of such value. While the appropriate question or questions in your situation may vary, you will never know if restructuring your business is possible if you do not consult an experienced and knowledgeable Chapter 11 attorney as soon as possible. Do not wait another day. The sooner you consult us, the sooner we can answer your questions and prepare your case in advance to make the process easier.

People will often remark that a Chapter 11 reorganization seems too good to be true however, to achieve the best results you must work closely with a Chapter 11 attorney to satisfy all the requirements that will permit you to get a good result.

Small business bankruptcy: The smaller your business, the harder it is to get the time you need to gather assets and take steps to pay down your debt. An efficient Chapter 11 bankruptcy filing can give you the time you need. However, with the new subchapter v laws coming into effect next year small business owners will have an easier time reorganizing.

Chapter 11 bankruptcy for businesses: Chapter 11 bankruptcy will give you time and protection you need to work with your creditors to create a payment plan your business can actually afford. Chapter 11 bankruptcy for individuals: Chapter 11 bankruptcy is not just for businesses. There are many individuals with enough personal assets to require a plan that can handle their unique concerns

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You want to be able to pay off your debts, but there may come a time when you realize you cannot do it under the current conditions. Whether you are facing foreclosure or are facing creditor harassment, Chapter 13 bankruptcy could give you the time and resources to protect your assets and get the relief you need. At the Orantes Law Firm, in Los Angeles, bankruptcy attorney Giovanni Orantes is dedicated to helping individuals throughout Southern California obtain relief from debt and protection from creditors by filing Chapter 13 bankruptcy.

Filing for Chapter 13 bankruptcy can provide immediate and long-term solutions. When you file, you receive an automatic stay, which immediately stops issues such as collection on lawsuit judgments, foreclosure, creditor harassment, and wage garnishment.

Learn about Chapter 13 bankruptcy:

Debt restructuring: When you file Chapter 13 bankruptcy, we will help you create a three- to five-year payment plan to discharge your debts. You only pay what you can afford – basically, in exchange for what you have left-over after you pay your reasonable living expenses, you can discharge up to $360,475. Since many of us have little left after we pay our expenses, you may pay a very small percentage to your creditors, if anything, and still get relief from your debts. At the end of the plan, your remaining dischargeable debts will be wiped clean.

Differences between Chapter 13 bankruptcy and debt consolidation: Chapter 13 bankruptcy differs from so-called debt consolidation plans in that it offers you the full protection of U.S. bankruptcy laws – importantly, no creditor can sue you or otherwise harass you just because they do not want to be part of your plan. If you satisfy the Chapter 13 requirements, creditors have no choice but to be bound by your plan.

Second mortgage lien stripping: In some cases, liens can be stripped from second mortgages when you file Chapter 13 bankruptcy. We understand the full range of bankruptcy options you have at your disposal. If you do not have significant assets you need to protect, you may want to consider Chapter 7 bankruptcy. If you have more than $360,475 in unsecured debt and more than $1,081,400 in secured debts, Chapter 11 bankruptcy may be an option for you.

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Orantes Law Firm P.C.

About Subchapter V Bankruptcy:
Bringing Forth A New Subchapter for Small Businesses

CHAPTER 7 BANKRUPTCY

CHAPTER 13 BANKRUPTCY

CONTACT US | CONTÁCTENOS

Orantes Law Firm P.C.

About Subchapter V Bankruptcy: Bringing Forth A New Subchapter for Small Businesses

CHAPTER 7 BANKRUPTCY

CHAPTER 13 BANKRUPTCY

CONTACT US | CONTÁCTENOS

About Subchapter V Bankruptcy:
Bringing Forth A New Subchapter for Small Businesses