For many people in Tennessee, bankruptcy can be a daunting and overwhelming prospect. However, if you are struggling with unmanageable debt, it is important to know that there are options available to you. One such option is subchapter 5 bankruptcy, a relatively new form of bankruptcy designed specifically for small businesses and individuals with debts of less than $7.5 million. In this blog post, we will take a closer look at what subchapter 5 bankruptcy is, who might be eligible to file for it, and the benefits it can offer.

What is Subchapter 5 Bankruptcy?

Subchapter 5 bankruptcy was created as part of the Small Business Reorganization Act of 2019. Its purpose is to provide a streamlined and cost-effective process for small businesses and individuals to restructure and eliminate their debts. Some of the key features of subchapter 5 bankruptcy include:

- A simplified reorganization plan process

- No requirement for a committee of creditors

- No need to obtain approval from creditors for the reorganization plan

- Filing fees can be paid in installments

Who Should File for Subchapter 5 Bankruptcy?

Subchapter 5 bankruptcy is specifically designed for small businesses and individuals with debts of less than $7.5 million. To be eligible to file for subchapter 5 bankruptcy, you must meet certain criteria. These include:

- Being engaged in commercial or business activities

- Owning no more than $7.5 million in debt

- Earning at least half of your income from your business

- Being an individual or married couple, rather than a corporation or partnership

Benefits of Filing for Subchapter 5 Bankruptcy

There are several benefits to filing for subchapter 5 bankruptcy. These include:

- Cost-Effective: One of the primary benefits of filing for subchapter 5 bankruptcy is that it is often less expensive than other forms of bankruptcy. This is because it eliminates certain requirements, such as the need for a committee of creditors.

- Reduced Plan Length: In a typical chapter 11 bankruptcy, the debtor has up to 5 years to repay their debts. With subchapter 5 bankruptcy, the plan length is limited to 3 years, making it a quicker and more efficient process.

- Greater Control: Unlike other forms of bankruptcy, in subchapter 5, debtors retain greater control over the bankruptcy process. This includes being able to draft their own reorganization plans and being granted more leeway in determining treatment of unsecured creditors.

- Fewer Restructuring Hurdles: With subchapter 5 bankruptcy's simplified reorganization plan process, small businesses and individuals have more flexibility in restructuring their debts.

Overall, subchapter 5 bankruptcy is an attractive option for small businesses and individuals who are struggling with unmanageable debt. By offering a streamlined and cost-effective process, it provides an opportunity for these entities to effectively restructure and eliminate their debts. If you are considering subchapter 5 bankruptcy, it is important to consult with an experienced bankruptcy attorney who can guide you through the process and help you determine whether it is the right option for your specific situation.