Chapter 11 Sub-Chapter 5

With the COVID19 virus came special legislation to protect small businesses in general as they are the backbone of the American economy. Essentially, the Subchapter 5 is a Chapter 11 that is expedited and has more debtor control. It reduces many other requirements of a traditional Chapter 11 bankruptcy, allowing for a substantial reduction in cost and time. The Debtor has to still divulge and let the creditors know projections and the financials of the business, but some of this is relaxed and can be estimated. Further, the Debtor is more in control as they are the sole entity to propose a plan (or budget) to the court for approval. Also, in doing so they are allowed to project and use good faith estimates in doing so for future growth. In a traditional Chapter 11, the trustee or the creditors can do that for the Debtor and more hard concrete numbers are required to propose and backup the plan and the “growth” of the company. Further, the plan must be either agreed to by all parties or the court has to approve it over objections within approximately 3 months from the start of the bankruptcy or it will be dismissed. This is a limited and time sensitive option as it only exists for a year from the implementation of the legislation or early 2021.