Another area of increased visibility is Subchapter V filings. Subchapter V filings are for smaller businesses with liabilities not exceeding $7.5 million. This area has grown as, prior to COVID-19, Subchapter V debtors had a ceiling of $2.6 million in liabilities. Early in the pandemic, Congress provided the SBRA (Small Business Relief Act) with some Covid-19related amendments. One amendment increased the total amount of debt that a Subchapter V debtor could have to $7.5 million. Those amendments expired in March of this year, but Congress recently enacted a two-year extension. Subchapter V provides advantages for small businesses verses a regular Chapter 11 reorganisation. The major advantages are reductions in cost and time. No US Trustee fees are required to be paid in a Subchapter V. This could save a company tens of thousands of dollars over the life of a bankruptcy. The timelines for filing a plan are much shorter, which expedites the reorganisation. There is no formation of a creditors’ committee, so the debtor is not paying for those legal fees and potentially resolving the committee’s concerns with the plan. Creditors should prefer Subchapter V filings as a plan will be ready for confirmation earlier, thus expediting the payment of claims. The amount to be paid under the plan should be higher, as the debtor should have more money available to distribute to unsecured creditors due to lower administration costs when compared to Chapter 11. What should legal counsel be aware of regarding consumers who have filed for bankruptcy protection? The most important thing is to have procedures in place for when you receive notice of a bankruptcy filing. The automatic stay goes into effect immediately and any action to collect on a debt after the filing of a bankruptcy case could subject the creditor and counsel to sanctions. Debtors’ attorneys are very litigious when it comes to stay violations. Unfortunately, it seems that the playing field has changed dramatically over the last few years. In the past, if there was an issue regarding a potential stay violation, debtors’ counsel would first reach out to the creditor or counsel to advise of the bankruptcy filing, ask for the collection activity to cease, and put the debtor back to the status quo. Now, we see motions to show cause for violating the stay or adversary proceedings a day after an alleged violation. These motions seek recovery of actual damages, punitive damages, attorney’s fees and costs. Even though the violation could have been resolved with a call, counsel are incentivised to file motions and potentially recover attorney’s fees. Some courts are taking a very tough stand and issuing thousands of dollars in sanctions for violations of the stay. The second area is to make sure you are conscious of all deadlines. Under the Federal Rules of Bankruptcy Procedure, the US Bankruptcy Code, and case law, bankruptcy deadlines are unforgiving. If you miss a deadline, more than likely it will be a complete bar to proceeding with a specific event. This could be filing of a proof of claim. If your claim is not timely filed and an objection is filed, it is highly unlikely that you will be paid. Failure to file complaints to determine dischargeability of debt or to make an objection to discharge is a total bar, and the underlying debt will be discharged. The last thing is to be aware of your local rules. Some creditors’ attorneys practice on a national basis. Filing claims can be done without being an attorney. Make sure you are familiar with any local procedures as it may cause your claim to be disallowed. As a highly skilled practitioner in creditors’ rights and bankruptcy law, what advice would you offer to less experienced legal professionals looking to specialise in this side of law? Learn as much as you can about the area of law. When I was a young lawyer, I had the opportunity to sit in court rooms around the Northern District of Ohio on extended bankruptcy dockets. That is where I gained knowledge of Chapter 11 proceedings. Listening to some of the best lawyers in the field argue complex cases accelerated my understanding of bankruptcy law. As I became more involved in Chapter 11 cases, I continued to utilise that knowledge. Do not lose the opportunity to learn by sitting in a court room. My second recommendation is to ask questions. You learn by asking questions. Bankruptcy law is not straightforward and there are intricacies in every statute or rule. Utilise the resources that you have available, whether in your own firm or in the industry. If you can, find a mentor. They are always helpful not only in answering legal questions but in navigating the legal profession. My last recommendation is 56 LAWYERMONTHLY SEPTEMBER 2022 Under the Federal Rules of Bankruptcy Procedure, the US Bankruptcy Code, and case law, bankruptcy deadlines are unforgiving.
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