What Is Subchapter 5 Bankruptcy in the State of New York?

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To learn more about the benefits of subchapter 5 bankruptcy, keep reading, and then give our legal team a call today. At the Law Offices of Michael D. Pinsky, our skilled Newburgh bankruptcy lawyer can help. In the meantime, here are some questions that you may have about subchapter 5 bankruptcy:

How does subchapter 5 bankruptcy work in the state of New York?

Initially, this type of bankruptcy was restricted to businesses with $2.7M in total secured and unsecured debt, however, the Coronavirus Aid, Relief and Economic Security Act (“CARES ACT) passed in March 2020 now allows businesses with collected debt up to $7.5M to be eligible for Subchapter 5 in order to meet the requirements of small businesses during these financially challenging times. Small businesses must demonstrate that at least half of their pre-petition obligations are derived from commercial business activities. Again, only businesses described as “single asset real estate,” indicating they emanate all income from the function of a single piece of real estate substantially, are not authorized. If you would like to learn more about Subchapter 5, it is in your best interest to reach out to our experienced New York bankruptcy attorneys. We are on your side.

What are the advantages of subchapter 5 bankruptcy?

There are several different benefits that Subchapter 5 supplies. This is because it delivers a more efficient and economical way to negotiate a Plan of Reorganization with your creditors, including the following:

  • No quarterly U.S. trustee fees;
  • No unsecured creditor committee;
  • No absolute priority rule. Equity holders maintain their equity in the company without needing to add new capital;
  • Reorganization plan confirmation is possible without agreement by creditors as long as criteria are met that include equitable treatment of creditors.

Reach out to our firm today if you have any lingering questions or concerns about this. Our legal team is equipped with the knowledge and experience needed to assess your company’s business and clear the problems it is facing to determine if this is a possible tool to help your business succeed. Our skilled bankruptcy attorneys will guide you through the entire process from filing to confirmation of a Subchapter 5 Plan in order to appear as a more successful business. We look forward to hearing from you.

Where do I begin?

Keep in mind that Subchapter 5 is a streamlined form of Chapter 11 of the Bankruptcy Code. It is made by filing a Chapter 11 petition and selecting Subchapter 5. After that, the small business debtor files documents with the court, including a current balance sheet and statement of operations. Keep in mind that a plan of reorganization must be completed within 90 days from the date of filing the petition. A Subchapter 5 U.S. trustee is assigned to watch over the small business debtor’s plan of reorganization.

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