Business bankruptcy isn’t just for companies that need to close. The bankruptcy process can also help struggling organizations reduce their debt and regain financial solvency.
Chapter 11 bankruptcy can help large, previously-successful companies restructure to reduce operating expenses and limit ongoing financial obligations. Many nationwide organizations streamline their operations and reduce financial obligations through Chapter 11 filings.
Unfortunately, Chapter 11 bankruptcy is a relatively costly and time-consuming process, which may make it feel inaccessible to small business owners. For those who cannot justify the complexity and cost of a traditional Chapter 11 bankruptcy, a Subchapter V filing could be an option.
What is Subchapter V?
Lawmakers constantly review and adjust federal bankruptcy regulations. In 2019, lawmakers sought to address the challenges faced by struggling but promising small businesses during the bankruptcy process. They expanded the options for Chapter 11 bankruptcy to make the process accessible to smaller companies.
Under a Subchapter V filing, Chapter 11 bankruptcy is a much more streamlined and affordable process. There are no creditors committees, and the filer remains in control of their company.
Business leaders can take steps to address the financial issues interfering with the success of their companies. They can renegotiate executory contracts. They can alter the terms for some debts or discharge others, eliminating the need to pay those obligations later.
Small business owners who feel overwhelmed by debts, but confident that their companies could return to solvency with appropriate interventions, may want to discuss their options with a bankruptcy attorney. Filing a Subchapter V bankruptcy can help struggling companies become profitable again and can limit the likelihood of legal action from creditors interfering with company operations.