In February 2020, new bankruptcy laws become effective for small businesses seeking to reorganize under chapter 11 of the bankruptcy code.  The sweeping changes make it much easier and affordable for small companies to obtain relief under the newly titled “Subchapter V” of chapter 11.

Businesses who qualify to file bankruptcy under Subchapter V will realize several important benefits.  While a trustee is appointed, the small business will remain in control of its operations and the trustee is tasked with assisting the company’s reorganization.  Only the small business may propose a plan and, unlike traditional chapter 11 cases, the plan will not need to comply with the absolute priority rule where the businesses owners could not retain their ownership stake unless they contributed new value into the bankruptcy case.  Mortgages and other loans can be modified in the reorganization plan even over the objection of the lender.

If you own a business that is struggling with debt, but otherwise profitable in its operations, our attorneys at Hurtt & Johnson can advise you about your options to reorganize in bankruptcy under chapter 11, chapter 12, or chapter 13.  We can also assist with filing a traditional bankruptcy under chapter 7.