The 2019 Small Business Reorganization Act created Subchapter V (11 U.S.C. § 1181) to allow smaller businesses to reorganize faster and cheaper. The current debt cap is roughly $3M (temporarily raised to $7.5M in 2024).
Four Reasons Subchapter V Suits Korean Business Owners
(1) Owner remains in possession of the business (DIP). (2) A plan must be filed within 90 days — fast. (3) No mandatory creditors’ committee — lower cost. (4) Residential mortgages may be modified in narrow circumstances.
Fort Lee · Flushing · K-Town Reorganizations
Fort Lee Korean restaurants file in the District of New Jersey Bankruptcy Court.
Flushing and K-Town (NYC) businesses file in the Eastern District (Brooklyn) or Southern District (Manhattan). NY has more Subchapter V filings than NJ, and the trustees there have substantial experience with small business reorganizations.
Typical Reorganization Timeline
Step 1 — Petition and Automatic Stay
Filing immediately triggers the automatic stay — all collection, suits, and enforcement halt; the business keeps operating.
Step 2 — 90-Day Plan Submission
Song Law Firm structures creditor-by-creditor repayment, lease renegotiation, and operating-cost reductions. Subchapter V also permits assuming or rejecting leases — a strong leverage point.
Step 3 — Confirmation and Discharge
After court confirmation, the business operates while distributing disposable income to creditors for 3–5 years. Discharge follows confirmation; remaining debt is eliminated.
Eligibility
(1) Aggregate debt at or below ~$3M. (2) Majority business debt (not personal). (3) Single-asset real estate businesses excluded.
FAQ
Q. What about SBA EIDL loans?
SBA EIDL loans are general claims and can be included in the plan. Note: EIDL loans above $200,000 often involve personal guarantees, so a parallel personal bankruptcy may be necessary. Song Law Firm runs both analyses.
Our Commitment
Song Law Firm helps Korean American clients across NJ and NY navigate every step — pre-filing creditor negotiations, asset protection strategy, and post-discharge credit recovery — in Korean, English, and Chinese. Our team serves Fort Lee, Bergen County, Hudson County, and the broader NJ–NY metro area.
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This column is for general informational purposes only and is not legal advice on any specific matter. Reading this article or contacting Song Law Firm does not create an attorney–client relationship. Please consult a qualified attorney for advice on your particular situation.
