New Small Business Option

Last Fall Congress passed a new subchapter of Chapter 11, Subchapter V which is a new option for small businesses.  It doesn’t go into effect until later this month, so no one really knows how it is going to work yet; but it appears to be a lot more accessible for really small business owner/debtors.

One of the many problems of a traditional chapter 11 bankruptcy filing is not just the extraordinary expense, but the amount of reports and records that had to be maintained by the debtor.  It looks like the new Subchapter V will be a lot more accessible for businesses that don’t have an in-house CFO — or even an in-house accounting office.

It will be a few more weeks before it goes into effect, and it will be interesting to see how long after that before someone files the first case, but I think all bankruptcy practitioners are looking forward to seeing if this is a real, practical solution for the sole proprietor or the business with a handful of employees to successfully restructure debt and recover from a rough patch.

As is always the case, though, all reorganization bankruptcies require that there be enough business left to reorganize.   Too often, small business owners wait too long to call a bankruptcy lawyer.


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