Chapter 5 or V

Chapter 5 or V

Chapter 5 bankruptcy, also known as Subchapter 5, is a bankruptcy option for small businesses and individuals that aims to simplify the reorganization process: 

• Eligibility

Businesses with unsecured debts under a certain threshold set by federal law are eligible for Chapter 5 bankruptcy. 

• Benefits

Chapter 5 bankruptcy offers several benefits, including: 

• Continued business operations: Business       owners can remain in control and continue operating their business while       developing a repayment plan. 
• Reduced costs: Chapter 5 bankruptcy is less       expensive and time-consuming than Chapter 11 bankruptcy. There are       no fees associated with a committee of creditors, and the filing fee is       lower. 
• Streamlined process: There are fewer       requirements and shorter deadlines than in Chapter 11 bankruptcy. 
• Creditor-friendly: Chapter 5 encourages       collaboration with creditors to promote consensual resolutions. 
• Reorganization plan

The debtor must submit a plan within 90 days that details how debts will be paid over three to five years. The plan is based on the debtor's disposable income. 

• Trustee

A trustee is appointed to assist with the reorganization process and disburse payments to creditors. 

Subchapter 5 bankruptcy was introduced in 2020 as part of the Small Business Reorganization Act.