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Bankrupcy Law
Chapter 5, 7, 13
Description of Subchapter V (Chapter 5)
BankruptcySubchapter V, enacted by the Small Business Reorganization Act of 2019 (SBRA), provides a more accessible and affordable path for small businesses to reorganize their debts than a traditional, complex Chapter 11 filing. Key features include:
- Debtor Retains Control: The business owner typically remains in control of daily operations and assets.
- Streamlined Process: The procedure is faster and less costly, eliminating some requirements like a creditors' committee (unless ordered otherwise) and creditor voting on a reorganization plan.
- Specialized Trustee: A Subchapter V trustee is appointed to monitor affairs, evaluate assets, and assist in formulating a fair plan, rather than liquidating assets.
- Debt Limits: Businesses must meet specific debt limits (which as of early 2025 are around $3.4 million, but have sometimes been elevated) to qualify.
Chapter 7: Liquidation (Fresh Start)
- Description: This chapter allows individuals and sometimes businesses to wipe out most or all unsecured debts, such as credit card balances and medical bills.
- Process: A court-appointed trustee sells the debtor's non-exempt assets to pay creditors. Texas has favorable exemption laws that often allow individuals to keep most of their property. Eligibility is determined by a "means test" based on income and expenses.
Chapter 13: Individual Debt Adjustment
- Description: This chapter allows individuals with regular income to restructure their debts and catch up on missed payments for secured assets like homes or cars.
- Process: The debtor proposes a payment plan to repay some or all debts over a period of three to five years, using their future disposable income. Creditor collection actions stop during this period.
- Goal: To avoid foreclosure or repossession and keep property by making manageable payments through a structured plan.
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WESTCOTT LAW GROUP PLLC
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E-mail: Cyril@westcottlawyers.com mycase@westcottlawgroup.com Tell: +1 832-831-1412 Fax: +1 832-218-4755 After Hour And Weekends (New Client's Only) Tell: +1 (832) 370 9621
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