I had a conversation recetly with a business owner (some $ 2 Million turnover) in a similar situation as the Twisted Root Burger featured on the Wall Street Journal July 11th: business reduced by 50% with little certainty over what’s coming up in the next 18 months or so.
In this owner’s case, yes, bankruptcy Subchapter 5 of Chapter 11, was the solution. (his debt was just over $6 MM).
If you’re not familiar with this law passed last August, “Subchapter V of the bankruptcy code’s Chapter 11. Qualifying debtors are freed from the requirements for an estate-funded creditors’ committee and court approval for restructuring plan voting materials. The law also empowers an independent trustee to oversee proceedings and expedite case resolution.
Crucially, the act permits debtors to propose and confirm plans without the approval of any impaired creditor groups, while keeping equity in the business to maintain it going forward.”
Bloomberg Law News, April 15th, 2020
The Cares Act established a $7.5 MM yearly debt cap for these small businesses.
“Under Subchapter V, a debtor has 90 days to file its reorganization plan of reorganization or ask the court for an extension if faced with it faces circumstances for which it “should not justly be held accountable.”
Bloomberg Law, April 15th 2020
Indeed small businesses have been the most stressed out during the Covid-19 pandemic. They had to do soft openings, then closing again, reopening again, testing the waters…this unpredictability has put many under extreme stress and a fight for survival. People have started testing out Subchapter 5, which may breath new life into their business.