The new small business bankruptcy Sub chapter 5

There is a new style of Chapter 11 created specifically due to this COVID 19 virus under the CARES act and is specifically aimed at the small businesses in America. They designed such to reduce costs, minimize attorney fees and be expedited in nature to keep businesses afloat. It is deemed a “Sub 5” for the section of the law it is named after. In this type of bankruptcy, the owner is allowed to keep possession and run the business while the bankruptcy is ongoing, allows for predicted estimates as to the growth and financial operation of the business and only allows the business owner to propose how the plan to reorganize the debt will go. This allows for maximum options and control of the business while streamlining and reducing time, money and expenses to protect the business. This bankruptcy option is roughly done within 5 months from initial consult to conclusion.

Like all other types of bankruptcy, this has the legal power of an “automatic stay”. This means that when filing, bankruptcy laws stops your creditors from collecting from you. Basically, “it buys you time,” and gives you bankruptcy protection.

And time is everything. For example, take a restaurant that was having its best year before the pandemic, but then its revenue disappeared. A Subchapter 5 bankruptcy could help the company by halting creditor collections and allowing owners to renegotiate terms.