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Bankruptcy Litigation

Turn that Frown Upside Down

Using Subchapter V’s Unlimited Debt Limit & Confirmation Requirements to Eradicate Personal Guarantees

Limitations to Subchapter V suggest that it will be of no use to all but very small companies, but before turning completely away from the topic, there are other considerations in play.

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The current $7.5 million debt cap which a debtor cannot exceed, pursuant to Bankruptcy Code §1182, to qualify to elect Subchapter V treatment (under Code §103) is well understood: the amount doesn’t include debts that are owed to an affiliate or an insider; for purposes of calculating the cap, the debts of the particular debtor must be aggregated with the debts of any affiliate that is also in bankruptcy; and the cap is determined as of the Petition Date.

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