It has long been suggested that struggling small businesses have little potential to reorganize by virtue of traditional Chapter 11, which was designed more for manufacturing giants than the local diner. Typically, attorney costs, large creditor leverage and the administrative drains on management overwhelm and ultimately doom a small business. Some of these concerns were addressed in the 2005 amendments to the U.S. Bankruptcy Code, but those arrive with a mixed bag of effects.
Before Congress now is the ‘Small Business Jobs Preservation Act of 2010’ [S. 3675], sponsored by Sen. Sheldon Whitehouse [D-RI]. This proposed legislation would amend Chapter 11 of title 11 by creating a subchapter V. Generally, the proposed subchapter V allows for small businesses with no more than $7,500,000, excluding insider debt, to receive a discharge by having a trustee appointed that would monitor and ultimately, distribute all of the small business enterprise debtor’s (“SBE”) disposable income over the next three to five years (“Super” cramdown). Essentially, it would seem, the Plan administration of the case would mirror that of a typical Chapter 13, with the Absolute Priority Rule surviving for secured creditors, wherein those creditors would have to receive as much as they would receive in a Chapter 7 liquidation.
There could be different rules for filing personal bankruptcy under chapter 7 or 13. Therefore, choosing the right option for securing debt relief could be a challenging task. This only necessitates the urge for proper federal bankruptcy information for debtors who are considering filing bankruptcy.
Bankruptcy Only offers professional services to assist debtors in understanding the entire bankruptcy filing process and requirements to get rid of their debts.
Typically, a chapter 7 bankruptcy is capable of discharging all personal debts. A chapter 7 liquidation process usually involves selling off the debtor’s assets except exempted ones for repaying the creditors. Nevertheless, as per the new bankruptcy laws and regulations, if the monthly income of the bankruptcy filer is high, he may not qualify for chapter 7. To add to that, chapter 7 cannot be re-filed for at least 8 years after discharge of debts.
On the contrary, in a typical chapter 13 bankruptcy, the debtor is required to propose a monthly repayment plan which is scattered over 3 to 5 years in order to repay his creditors. And after the plan is successfully executed and the creditors are repaid, the debtor can qualify for discharge of debts. But debtors are allowed to retain all owned assets even while he continues to repay the creditors through a court approved plan. In addition, as compared to chapter 7, chapter 13 bankruptcy filings permits debtors to file for another bankruptcy within shorter durations which in some cases could be as less as 2 years.