Subchapter V, ABCs Are Key Tools for Troubled SMBs
April 5, 2021
Even as the COVID pandemic appears to be on the wane, small and medium-size businesses (SMBs), as well as the lenders, vendors, and others that conduct business with them, continue to address their continued viability. Fortunately for these SMBs, two often overlooked tools may provide a solution to their need to restructure or wind down – Subchapter V of the U.S. Bankruptcy Code and assignment for the benefit of creditors (ABCs).
In this article in the April 2021 issue of the Turnaround Around Management Association’s Journal of Corporate Renewal, Otterbourg partner Erik Weinick, along with A. Kumar Singla, managing director at Sherwood Partners Inc., explore some of the pros and cons of Subchapter V (whose “higher” debt limit of $7.5 million was recently extended for an additional year through March 2022) and ABCs. A copy of the article may be found here.
As explained, Subchapter V’s may provide a faster and less expensive path for the reorganization of SMBs by eliminating some of the more costly components of traditional Chapter 11 cases such as elimination of creditors’ committees and fees in the United States Trustee, while retaining some of the more traditional benefits of a Chapter 11, such as the ability to sell assets free and clear of encumbrances. On the other hand, ABCs may allow some of the benefits of a Chapter 7 proceeding without ceding control of the process to a Chapter 7 trustee.
For more information, please contact Erik Weinick at eweinick@otterbourg.com