Subchapter V Timeline: 6 Deadlines From Petition to 90-Day Plan

Six Deadlines

The rules of Subchapter V move things along much more quickly than the other chapters. You must meet six deadlines in order:

• file the bankruptcy papers (called your “petition”),
• list what you own and who you owe, including anything that is in dispute (your “schedules”),
• appear at your creditors’ meeting,
• file a report at least 14 days before your status conference,
• get your status conference within 60 days of filing,
• and file your plan within 90 days of filing.

Through all six, you are still the person in charge of the company.

This Subchapter is very useful, but a business that owes too much can not use it. The debt limit now is $3.424 million. If your business needs a Subchapter V, check this out first and then move quickly. The clock starts ticking from the day you file.

Your bankruptcy case starts when you file your petition, and it must have the Subchapter V election on it. Along with the petition, you must attach your latest balance sheets, statements of operations, cash-flow statements, and federal tax returns. If you don’t have them, you must make a sworn statement that they do not exist. When you do file, the court’s automatic stay will go into effect. This stops lawsuits and other collection efforts and gives you room to operate.

When you file, the U.S. Trustee appoints a trustee to help get a consensual plan. That person will not run the business. You do that. There are no quarterly U.S. Trustee fees.

You must list what you own, your income and expenses, and who you owe, as well as file a statement of what happened to your assets and how you ran your business, the Statement of Financial Affairs. You can get an extension, but it may be only up to 30 days from filing, absent “extraordinary and compelling circumstances.” Be working on the documents before you file.

The creditors’ meeting must happen no less than 21 and no more than 40 days after filing. In a Subchapter V, you and your senior managers must attend, along with your lawyer, although the court can waive the attendance for extraordinary reasons.

The status conference must happen no later than 60 days after filing your petition. The discussion has to move the case to a quick, low-cost result. You must give the court and all parties in interest a report at least 14 days beforehand. It says what you have done and will do to reach a consensual plan. You have to serve the report on the trustee, and all parties in the case.

File Your Plan Within 90 Days

You must file your plan within 90 days after you file your bankruptcy case. Only the debtor can file the plan in a Subchapter V case. Although creditors may object to the plan, they cannot file their own plan. Extensions are not automatic. You can get one only if the delay comes from circumstances you should not justly be blamed for. Being busy or not having financial records done is not a good enough reason to be late.

Your plan must have a short business history, a liquidation analysis of how much your creditors would get if you closed and sold, financial projections, and your commitment to pay. There is no disclosure statement or creditors’ committee unless ordered by the court.

Once the plan is filed, the creditors can vote and can object to the plan. The court can confirm the plan over the creditors’ objection, if it is fair, and has commitments for three-to-five-years of disposable income. Each creditor gets at least what he would have received in a Chapter 7 case. If you are an owner, you can keep your ownership even if creditors are not paid in full.

Disposable income is anything you make that does not go to running your business, or to supporting yourself and your family. Taxes come first, along with payroll and inventory. Money left after keeping things going goes to the plan.

If your plan is confirmed without consent, the discharge will come after you complete all payments due in the first three years of the plan. If the payments are stretched to five years, you do not get a discharge until then. Debts that come due after three or five years, as well as most priority taxes and domestic support debts, are not covered by the discharge. Neither are fraudulent debts.

In your plan, you usually cannot modify your home loan, but there is a narrow exception if the loan is secured only by your home, was not used mainly to buy it, and the loan was used mainly for the business. Raise it at your first meeting.

Confirmation can happen within several months. The plan payments usually go on for three to five years, so it usually takes that long to fully complete the case. Start working on your financial information early; in a financial sense, start the Subchapter V bankruptcy before you file.