Subchapter V’s creation under the SBRA marks a significant legislative effort to streamline bankruptcy proceedings for small businesses, aligning with the aim to offer a more accessible path to reorganization. By addressing the financial challenges specific to small businesses, subchapter V aims to facilitate quicker and less costly bankruptcies, thereby enabling more businesses to successfully reorganize and emerge from financial distress.
Subchapter V’s creation has become a popular option for eligible debtors. Recent statistics have shown that subchapter V is a more popular option for small business debtors than the traditional chapter 11 path, and with promising levels of success. The Department of Justice recently reported that “[c]ompared to other (non-subchapter V) chapter 11 small business cases, subchapter V cases have had approximately double the percentage of confirmed plans and half the percentage of dismissals, as well as a shorter time to confirmation.” With subchapter V’s growing popularity, it is increasingly important to understand the primary differences between a subchapter V case and a traditional chapter 11 case so that potential debtors can consider and choose their paths forward wisely, and creditors can likewise be prepared to participate in either process.
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