Appointment Of Subchapter V Trustee & The Small Business Reorganization Act

Only 250 individuals have been selected nationwide to serve as Subchapter V private trustees under the Small Business Reorganization Act. There are only four approved Subchapter V private trustees in our federal judicial district, the Eastern District of Pennsylvania, which includes the five-county Philadelphia metropolitan area and four counties in the Lehigh Valley region.

Friedman Schuman, P.C. is proud to announce that on February 14, 2020, Leona Mogavero, Esquire, was named one of the four Subchapter V trustees for our district. She has spent over 30 years representing creditors in Bankruptcy Court. Her experience allows to her to swiftly maneuver through the difficulties in these small business cases and to achieve consensus among all parties to confirm a successful plan of reorganization. If you are a small business or creditor who needs help, feel free to call Lee for assistance.

The Small Business Reorganization Act (“SBRA”), which took effect on February 19, 2020, added a new subchapter V (five) to the Bankruptcy Code (Sections 1181 through 1195) and is designed to reduce costs and facilitate the bankruptcy process for small business debtors who elect to proceed under the subchapter. The CARES Act increases the debt ceiling for Subchapter V debtors from $2,725,625 to $7,500,000. The increase is for a one-year period, only; however, the change in eligibility together with the current financial distress experienced by many small businesses virtually assure that there will be widespread filings under Subchapter V before the provision sunsets.

Click here for a summary of the SBRA by Lee Mogavero.

Who will benefit from the SBRA? The SBRA’s bipartisan support indicates that the measure is at least apparently even-handed in terms of its debtor-creditor orientation. Of course, as the adage goes, the “devil is in the details,” and it remains to be seen how the implementation of SBRA will affect the respective rights of the parties. Friedman Schuman, P.C. is prepared to serve our clients’ needs in this developing area, as well as in all aspects of loan work-outs, restructuring and insolvency.

Stay safe and healthy!