If you make too much money to qualify for Chapter 7 and your debts are mostly business debts and exceed 2,500,000, don’t miss the statutory window to file under Sub-Chapter V of Chapter 11. This new law allows for small business debtors to elect treatment under the Sub-Chapter and to by-pass the traditional Chapter 11 burdens of the absolute priority rule and the necessity to get at least one class to vote in favor of your plan.
Sub-Chapter V debtors can write a plan that pays the value of their net non-exempt equities together with their income net of priority and secured payments to their unsecured creditors and receive a full discharge of debts.
These provisions of the Code, similar in design to Chapters 12 and 13, specifically exist to give the small business debtor the chance to keep their business intact and after making good faith efforts and payments over 3 to 5 years, start fresh.
The original law, passed in 2019, set a limit for debts in this type of case at below $2,750,000. The CARES act lifted that limit to $7,500,000. BUT in order to get this higher limit, a case must be filed before March 27, 2021.
This article is written by an attorney at Attorney Donald Wyatt PC. Always consult an attorney before making any legal decisions. To make an appointment today, please click here to contact us.