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Is Subchapter V Bankruptcy Right for Your Small Business?By Jim Shenwick, Esq. | Shenwick & AssociatesAt Shenwick & Associates, we are receiving an increasing number of calls from businesses in financial distress. Whether their liabilities exceed their assets, or they lack sufficient cash flow to service debt and cover operating expenses, these businesses are facing difficult decisions.Three Options for a Financially Distressed BusinessBusinesses in financial difficulty generally have three options:1. Do nothing and close the business;2. File a Chapter 7 bankruptcy and have the business liquidated by a Chapter 7 Bankruptcy Trustee; or3. File for Chapter 11 bankruptcy. Within Chapter 11, there are two paths: a traditional Chapter 11 filing, or a Subchapter V small business bankruptcy filing.Why Traditional Chapter 11 Is Often Not the AnswerFor most small businesses, traditional Chapter 11 is too complicated, costly, and time-consuming. Many businesses that file for Chapter 11 ultimately have their cases converted to a Chapter 7 liquidation ( leaving them no better off than if they had simply closed) or the case is dismissed.The Advantages of Subchapter VSubchapter V was designed specifically to give small businesses a more accessible and affordable path through bankruptcy. Key advantages include:• No U.S. Trustee (UST) fees. Unlike traditional Chapter 11, Subchapter V debtors are not required to pay quarterly UST fees.• No Absolute Priority Rule. The business owner is not required to pay creditors in strict priority order before retaining an ownership interest.• Owner may retain the business. If a Plan of Reorganization is confirmed, the debtor can retain ownership of the business.• Impaired creditors need not approve the Plan. The Plan can be confirmed without the affirmative vote of impaired creditors, provided certain conditions are met.• No Disclosure Statement required. Unlike traditional Chapter 11, a separate Disclosure Statement does not need to be filed with the Court.• The Plan may modify the rights of secured creditors holding claims secured by the debtor’s principal residence, which is a significant tool not available in traditional Chapter 11.Key Requirements of Subchapter VTo qualify and operate under Subchapter V, a business must meet several important requirements:• At least 50% of the debtor’s total debt must be business-related debt.• A Plan of Reorganization must be filed within 90 days of the bankruptcy filing.• The debtor must commit all projected disposable income to Plan payments.While the above is a brief overview, Subchapter V offers meaningful benefits for eligible small businesses seeking a viable path forward without the burden and expense of a traditional Chapter 11 case. Every business situation is unique, and a thorough analysis is required to determine whether Subchapter V is the right fit.
Contact UsIf you are a business owner, client, or advisor with questions about business bankruptcy or Subchapter V, please contact Jim Shenwick, Esq. for a consultation.Jim Shenwick, Esq.  |  Shenwick & AssociatesPhone: 917-363-3391   Email: [email protected]Schedule a call: Please click the link to schedule a telephone call with me.https://calendly.com/james-shenwick/15min

We help individuals and businesses with too much debt, as well as creditors in bankruptcy cases.

 My law firm is representing a number of jewelry vendors who have sold goods to Saks, prior to their Chapter 11 bankruptcy filing. I am proud to announce that I was quoted in a New York Post article on the Saks Chapter 11 bankruptcy filing article. A link to the article can be found at https://nypost.com/2026/02/18/business/saks-and-neiman-low-on-luxury-goo...Clients or their advisors who have questions about being paid on their Saks receivables prior to the bankruptcy filing or about being paid for goods shipped after the Saks bankruptcy filing should contact Jim Shenwick, Esq Jim Shenwick, Esq 917 363 3391 [email protected] 
Please click the link to schedule a telephone call with me. https://calendly.com/james-shenwick/15minWe help individuals & businesses with too much debt! & creditors in Bankruptcy cases

Many clients have contacted Shenwick & Associates asking whether it is safe to ship goods to Saks following its Chapter 11 bankruptcy filing.The real concern is whether vendors will be paid for goods shipped after the bankruptcy filing.In most Chapter 11 cases, the answer is yes—shipping goods post-petition is generally safe, particularly where the debtor has obtained Debtor-in-Possession (DIP) financing.Here are the key considerations:Post-petition shipments receive priority payment status. Vendors who supply goods after the bankruptcy filing typically hold administrative expense claims under Bankruptcy Code §503(b)(1)(A). These claims must generally be paid in full as a condition to confirming a Chapter 11 plan under §1129(a)(9), giving them priority over pre-petition unsecured claims.DIP financing supports ongoing operations. DIP financing provides liquidity so the debtor can continue operations and pay ordinary-course expenses, including post-petition vendor invoices. Courts often authorize payment of undisputed post-petition invoices in the ordinary course.Chapter 11 encourages vendors to continue shipping. The purpose of Chapter 11 is to allow a debtor to reorganize while continuing business operations. The Bankruptcy Code structure incentivizes vendors to continue supplying goods so the business can survive.Continuing shipments may preserve business relationships. Vendors who continue supplying merchandise maintain relationships with buyers and may offset losses from pre-petition shipments through continued profitable sales. Vendors who refuse to ship risk losing shelf space to competitors.Vendors are not required to ship post-petition. The Bankruptcy Code does not obligate vendors to continue selling goods after the filing; the decision remains a business judgment.Payment is not absolutely guaranteed. While administrative claims are entitled to priority, risk remains if the case later converts to liquidation and administrative expenses exceed available assets.Critical Vendor or “Doctrine of Necessity” relief may be available. Vendors supplying unique or essential goods may seek treatment as a Critical Vendor, allowing payment of certain pre-petition amounts if the court finds such payments necessary to preserve operations. While beneficial, this status is not required for vendors to safely ship post-petition goods.In most circumstances, vendors can safely continue shipping goods to a Chapter 11 debtor like Saks, especially where DIP financing is in place.Vendors or advisors with questions regarding shipping goods or protecting claims in the Saks bankruptcy are welcome to contact us.
Jim Shenwick, EsqShenwick & Associates917-363-3391[email protected]Please click the link to schedule a telephone call with me.https://calendly.com/james-shenwick/15Please click the link to schedule a telephone call with me. https://calendly.com/james-shenwick/15min

There is an alarming decrease in the number of attorneys representing debtors these days.  No new attorneys are entering the field. Attorneys in the prime of their career are exiting the field.  The attorneys remaining are quite older and they are scaling back their practice.  In the next 5 years several senior attorneys will fully retire.What is more, the attorneys still actively practicing are not hiring. No one is hiring junior associates. No one is building.This trend is not limited to consumer bankruptcy cases. Chapter 11 and 12 attorneys have also left the field. At a time when business and farm bankruptcies are rising, there is a lack of attorneys willing to take on these cases.The trend in consumer cases is for attorneys to work from home without supporting staff. Where are all the bankruptcy attorneys? Why are attorneys leaving the field in the prime of their career? Why is no one hiring? Something is wrong, but what is it?Three technology factors account for some of the decline in hiring:

• Remote 341 Hearings: Established bankruptcy firms hired associates to represent clients before the bankruptcy trustee, but those hearings transitioned to telephonic and later Zoom video hearings during Covid. It is no longer necessary to hire associate to cover hearings spread out in Omaha, Lincoln, Grand Island, North Platte and Scottsbluff, Nebraska.  In-person trustee meetings are a thing of the past.
• Digital Signatures: New court rules allowing clients to sign documents with digital signatures.  Clients no longer meet personally with an attorney to sign documents.
• Digital Documents:  Instead of dropping off a pile of bills, paystubs, bank statement, tax returns and other documents required to prepare a bankruptcy petition, most clients upload documents digitally.  Although some clients still hand over paper documents, most do not.  There is no need to meet with clients to receive paper documents.

These changes account for some of the reduction in bankruptcy attorneys and for the trend towards working from home without staff. But this does not explain why attorneys are exiting the field in the prime of their career. Shouldn’t the ability to represent clients remotely throughout the entire state without the need to travel to distant court hearings actually encourage entrepreneurial attorneys to expand their practice by hiring new associates? Shouldn’t cost reductions in gathering and signing documents cause firms to expand?  Something is wrong here.Lack of Compensation:The number one cause of a decline in the debtor’s bar is the lack of compensation.  Firms are not hiring new attorneys because they are not confident they can afford the salaries. Chapter 13 attorneys have seen a decrease of their income drop by nearly 20% over the past five years due to inflation.  The court’s response?  Apparently a 6% fee increase is arriving soon and Nebraska fees are in line with other courts in the 8th Circuit, but nevertheless a permanent pay cut has been levied. Chapter 13 attorneys are paid flat fee set by the court (currently $4,700) and attorneys lack the ability to charge hourly.  Attorneys are leaving the field to practice in other areas of law where they can get paid for their time.Chapter 7 attorneys charge a flat fee that is reviewed by the US Trustee’s office. Attorneys cannot collect fees after a case is filed (since their debt is discharged along with all other debts), and debtors cannot finance their case with personal loans.No Fee Splitting: Debtor attorneys may not share compensation or split fees with other attorneys without court approval, although creditor attorneys can and do split fees routinely. It is difficult to “team up” with other attorneys for this reason.Increase in Bureaucratic Complexity:  Our bankruptcy process becomes more complicated by the day. New rules and forms pop up every year. I recently handled a probate case and I was amazed that the procedures and forms were the same as 30 years ago. Everything was exactly the same.  Not so with bankruptcy practice.Bankruptcy Reform Act of 2005:  Congress made radical changes to the bankruptcy law in 2005 with the specific purpose of making the process expensive and difficult. They succeeded.  At first we did not notice the impact since the Great Recession of 2008 swelled the bankruptcy filings, but 20 years later the result is clear.  The incredible burden of gathering so much information has made the process miserable and tedious. Where do we go from here?Without reform this trend will continue. Attorneys will continue to leave the field and debtors will struggle to find competent representation. Farm clients are being turned away routinely. Business clients have few attorneys to pick from. Consumer attorneys are declining to represent difficult clients knowing they can never recoup the time expended in handling their cases.Suggestions:

• Review compensation rules to ensure attorneys receive fair compensation in comparison to other fields of law. Index fees to inflation.
• Cut down on burdensome procedural changes.
• Engage debtor attorneys in regular and informal settings to get real feedback.
• Sponsor “nuts and bolts” seminars to teach young attorneys how to practice.
• Fix the chapter 13 confirmation process. The stipulated confirmation order process is a failure. The Chapter 13 trustee attorneys are unwilling to resolve simple objections with a stipulation. 
• Promote uniformity in the Chapter 7 process.  Every trustee uses a different system to gather documents and has different practice rules. 
• Encourage attorneys to take on chapter 11 and 12 cases. Attorneys must feel confident they will be paid for taking on these complex matters. More educational and procedural information is needed. Sample plans, forms, and examples are needed to instruct new attorneys.
• Community Building.  Nobody likes working alone. Attorneys need a place to routinely visit with other local attorneys to improve their skills. Informal workshops that give CLE credit would be attractive.

Nebraskans need competent professionals to help them through hard times.