Restaurants were hit particularly hard by the COVID-19 pandemic in 2020 due to closures, restrictions on capacity and already-thin margins that precede the economic downturn. As these restaurants seek remedies to get their businesses on the right track, Graham Stieglitz authored a December 2020 article for Full-Service Restaurant Magazine (FSR) discussing efficient restructuring processes available to qualifying businesses under the Small Business Reorganization Act (SBRA).

Many national restaurant chains filed for Chapter 11 bankruptcy relief in 2020, but because these proceedings can be extremely costly and require extended timelines to complete, Stieglitz highlighted the SBRA and its new subchapter V (Sub V) bankruptcy proceeding as a faster and less expensive option. Small business debtors qualifying for Sub V are defined as those engaged in commercial or business activities with the aggregate noncontingent secured and unsecured debts not exceeding $2,725,625, with more than 50 percent of debts required to be from commercial or business activities. The CARES Act expanded the debt cap to $7,500,000.

Sub V proceedings offer opportunities not available in a Chapter 11 process, including allowing the business owner to retain equity in the company, expedites and favors the Debtor in plan confirmation and post-confirmation modifications and stops administrative expenses from suffocating a reorganization.

For more details on the benefits, opportunities and requirements under Sub V bankruptcy proceedings, please read the full article here.