Back
Back
Back
Back
Back
Back
Back
Back
Back
Back
Back
Back
Back
Back
Back
Back
Back

Know the Law: Newly Enacted Small Business Bankruptcy Provisions

Written by: Christopher M. Dube & Joseph A Foster

Published in the Union Leader (6/7/2020)

We've received several questions about the newly enacted small business bankruptcy provisions. Below are a few of the frequently asked questions that businesses are asking.

Q: I’m a small business owner in New Hampshire who has been hit hard by the coronavirus pandemic. What can I do to ease burdens on my business in the near term to help get through this period?

A: In many cases lenders, trade creditors and landlords will negotiate concessions or terms if you can demonstrate the business’s underlying long-term strength.

Q: Is reorganization in bankruptcy an option?

A: Many considerations go into determining whether a business can successfully reorganize, but new Subchapter V of Chapter 11 created by the Small Business Reorganization Act (“SBRA”) makes the tools and protections of Chapter 11 reorganization more practical for small businesses.

Q: What is a “small business”?

A: Subchapter V is available to individuals or entities engaged in commercial or business activities (other than primarily owning/operating real property) who owe no more than $7.5 million.

Q: What are benefits of Chapter 11, Subchapter V for a small business?

A: More control over the process of developing a plan of reorganization makes it more likely that a plan can be efficiently proposed and approved.

Also, before the SBRA, a class of impaired creditors needed to vote in favor of the plan, which often led to the business being forced to agree to pay more than it could reasonably afford.

Q: Can I still own my business after a bankruptcy?

A: In a regular Chapter 11 case, the so-called “absolute priority rule” prevents an owner, absent the contribution of cash or other significant “new value,” from retaining ownership over the objection of a creditor who would not be paid in full under the plan.

However, under Subchapter V, the absolute priority rule does not apply.

Q: Does my personal liability for business debt get discharged under Subchapter V?

A: If you personally guaranteed debt of your business entity, your personal liability will not be discharged as a result of the entity filing bankruptcy.

You should consult a professional advisor to assess your personal exposure and the effect of a bankruptcy filed by your business.

For more information on this topic, visit McLane Middleton’s Business Recovery Center at McLane.com.

Joe can be reached at [email protected].  Chris can be reached at [email protected].

Know the Law is a bi-weekly column sponsored by McLane Middleton, Professional Association.  We invite your questions of business law.  Questions and ideas for future columns should be emailed to [email protected].  Please note – Know the Law provides general legal information, not legal advice. We recommend that you consult a lawyer for guidance specific to your particular situation.

Integrity and trust

At McLane Middleton we establish and maintain long-standing relationships with our clients to help us better achieve their unique goals over time. This approach to building trust requires that our esteemed lawyers and professionals use their broad, in-depth knowledge and work together with integrity to ascertain sound resolutions to legal matters for their clients.

Strength in numbers

McLane Middleton is made up of more than 105 attorneys who represent a broad range of clients throughout the region, delivering customized solutions. As a firm we are recognized as having the highest legal ability rating. The firm is rated Preeminent by Martindale Hubbell and is recognized as one of the nation's leading law firms in Chambers USA. Our attorneys are distinguished leaders in their respective practice areas.

Meet Our People

Commitment and collaboration

McLane Middleton's versatile group of attorneys and paralegals become trusted authorities on each case through collaboration. We work with our clients to learn their individual needs first and foremost and, together, we develop comprehensive solutions to their specific legal matters. This approach helps us exceed our clients' expectations efficiently and effectively, client by client, case by case.

Practice Areas

A history of excellence

McLane Middleton was established in 1919 in New Hampshire, and has five offices across two states. However, deep historical roots don't allow you to become innate. Our firm is organized, technological, and knowledgeable. Our history means we are recognized. But our reputation is built on the highest quality of service and experience in very specific areas of law.

The Firm

Intelligence paired with action

Our team continuously seeks opportunities to enhance their professional development and put key learnings to action. The pursuit of further insight guides us to volunteer service opportunities, speaking engagements, and teaching roles. Our lawyers are sought after thought leaders across their industries, and recipients of leadership awards throughout the region.