Business bankruptcy can be far more complex than individual bankruptcies. Companies have more assets and revenue. They may also have substantially greater debts, some of which may be secured debts. The goal may be to reduce debts and ongoing financial obligations to keep the business operating, rather than to eliminate debts as part of the dissolution process.
Given the unique challenges that arise during a business bankruptcy, there are forms of bankruptcy that exist primarily for the benefit of companies. In recent years, business owners have had the option of pursuing a Subchapter V bankruptcy. Understanding this type of bankruptcy can help business leaders explore their options more effectively.
Subchapter V makes Chapter 11 accessible
Chapter 11 bankruptcy, also known as reorganization bankruptcy, allows a company to structure, streamline operations and discharge debts in an effort to keep the company operational and regain solvency. During a Chapter 11 bankruptcy, leaders within the organization typically maintain control of the company. They can work with the courts, as well as their creditors, to establish a reorganization plan that should bring the company back into the black.
Chapter 11 bankruptcy is expensive and lengthy, which may make it inaccessible to struggling small businesses. Federal lawmakers addressed this gap in the law by establishing Subchapter V bankruptcy cases.
A Subchapter V bankruptcy is a streamlined Chapter 11 bankruptcy designed especially for small businesses rather than massive, complex corporations. Successful companies that face temporary economic challenges may find that a Subchapter V filing is the best option available.
Discussing different types of business bankruptcy with a skilled legal team can help business leaders and owners choose the best option for their circumstances. A Subchapter V filing can help a small business continue operating while addressing its unsustainable financial obligations.