Anyone have any experience with Chapter 11 Subchapter 5?

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September 09, 2024

by a searcher from St. Lawrence University in Vermont, USA

Looking at a distressed business - Does anyone have any experience with the subchapter 5 process?

Potentially a bad question as I know nothing about the process, but is it possible to change ownership as part of the reorganization?

Would love to hear from anyone that has experience with the process. The business meets all the size & eligibility criteria

Thanks!

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Reply by a searcher
from The University of North Carolina at Chapel Hill in Austin, TX, USA
Chapter 11 sub V is essentially a restructure of debt. You can sell equity to new owners but all the cashflow has to go to the debt holders until the court-approved plan is completed. Plans range from 3-5 years, generally, so ask how far into the plan the business is. Make sure they have stayed compliant the entire process and made all secured payments. After the plan is over, the business should emerge debt free. I have no idea about financing the purchase of a business in this position though. It would probably have to be non-traditional lending or all equity from investors I would assume.
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Reply by a professional
from University of Virginia in Holmes, NY 12531, USA
Hi ^redacted‌ - began my career doing bankruptcy/restructuring/distressed work and have handled several subchapter V matters. If I can be helpful at all, please don’t hesitate to DM or email me at redacted All the best, Matt
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