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Scura Represents The First Subchapter V Bankruptcy Plan for an Individual

September 14, 2020 Scura Law Firm Bankruptcy, Chapter 11

We are proud to present the first consensual Chapter 11 Subchapter V Bankruptcy Plan of Reorganization for an individual debtor. Here, the Debtor’s proposed plan of reorganization was approved by the US Bankruptcy Court for the District of New Jersey on September 8, 2020, and was primarily handled by one of Scura’s attorneys, Carlos D. Martinez, Esq. This is a groundbreaking case for bankruptcy law and for the implementation of the new Small Business Reorganization Act


The Small Business Reorganization Act (SBRA), or Subchapter V, is a simplified process of Chapter 11 Bankruptcy, designed for small businesses to reorganize following financial hardships.

In a standard Chapter 11 case, the debtor would have to make all payments pursuant to the confirmed plan over a period of years before receiving a bankruptcy discharge. In some cases, five years may pass before the debtor obtains a discharge. In contrast, under the SBRA, if the Debtor in an individual case is able to obtain the required votes in favor of the proposed plan (referred to as a “consensual plan”), the debtor will receive an immediate discharge of his debt upon entry of the Confirmation Order, even if the Debtor has proposed a plan whereby certain creditors are paid over a certain amount of years Unlike a standard chapter 11 case, the Subchapter V case referenced above took a total of 6 months from the filing of the bankruptcy to the confirmation of the plan. On top of saving time, the debtor saved thousands of dollars in legal fees.

Prior to filing bankruptcy, the debtor owed $63,000 in taxes to the Internal Revenue Service. In his Chapter 11 plan, the debtor proposed to cure any priority and secured tax arrears owed to the IRS while also discharging close to $20,000 in unsecured taxes owed to the IRS. In addition, the approved Chapter 11 plan ensures the debtor will pay back the mortgage arrears on one of his two properties over the next 18 months while also surrendering another real property back to the mortgage company without any further negative impact to the Debtor. Lastly, the confirmed plan guarantees that the debtor will only have to pay back $11,000 (or approximately 1.5%) of the total $750,000 in unsecured debt owed prior to the filing of the bankruptcy, while approximately $739,000 of the remaining unsecured debt will be discharged upon entry of the order confirming the plan.

While this is the first approved consensual individual Subchapter V case, this is the second approved Subchapter V bankruptcy case in New Jersey. The first approved Subchapter V case, that of Montclair pizzeria Villa Victoria, is also represented by the attorneys at Scura.

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