Can a Chapter 11 Bankruptcy Save My Small Business in North Carolina?

From the team at Huggins Law Firm, P.C., we want to talk to the business owners.

You are not a “bad” businessperson. You are a fighter.

You built your company in Greensboro, High Point, or Winston-Salem from nothing. You survived a pandemic. You’ve handled inflation. You’ve made payroll when it seemed impossible.

But now, you are facing a “perfect storm.” A big client left, a loan came due, or your cash flow is just stuck. The creditors are calling. You are facing a “death spiral” and are terrified you are about to lose everything you’ve worked for.

When you hear “Chapter 11,” you think of giant airlines or failed department stores. You think, “That’s not for me. It’s too expensive. It’s too complex.”

You are right. It was.

But the law changed.

There is a new, powerful tool designed specifically for small businesses like yours. It is called “Subchapter V” of Chapter 11.

It is a faster, cheaper, and more powerful way to reorganize your business, keep your doors open, and get back to being profitable.

This is not a “liquidation.” It is a second chance.

Key Takeaways: A “Fresh Start” for Your Business

We know you’re in a crisis. If you only read one part, read this:

• This is NOT “Giving Up.” This is a strategic business move to save your company.
• “Subchapter V” is a GAME-CHANGER. This is a new type of Chapter 11, built for small businesses in North Carolina. It is faster, cheaper, and more powerful than the “old” Chapter 11.
• You STAY IN CONTROL. In a Subchapter V, you (the owner) stay in control of your business. This is called being a “debtor-in-possession.”
• The “Automatic Stay” STOPS Lawsuits. The moment we file, all creditor lawsuits, collection calls, and bank levies must legally stop. It gives you immediate breathing room.
• You “Force” a New Payment Plan: Chapter 11 allows you to restructure your debt. It lets you force your creditors to accept a new, affordable payment plan.
• This is a Fight. You Need a Litigator. A Chapter 11 is a high-stakes, complex lawsuit. Our firm’s deep experience in Criminal Law and Family Law litigation means we are not afraid of a courtroom. We are built for this fight.

What is “Subchapter V”? (And Why is it a Game-Changer?)

For decades, “Chapter 11” was a tool for only the “big guys.” It was a legal war that cost millions of dollars and took years. A small business in Asheboro or Burlington could never afford it.

In 2019, Congress passed the “Small Business Reorganization Act” (SBRA), which created Subchapter V.

This is Chapter 11… but it’s “Chapter 11 on speed.”

It is a streamlined process for businesses with (currently) less than ~$7.5 million in debt.

Here is why it is better and more powerful than the “old” Chapter 11:

• It’s FASTER. You must file your reorganization plan within 90 days. This forces a quick resolution.
• It’s CHEAPER. It eliminates many of the costly “committees” and fees that made the old Chapter 11 so expensive.
• You STAY IN CONTROL. This is the big one. In the old Chapter 11, creditors could “veto” your plan. In Subchapter V, only the owner (you) can propose a plan.
• The “Cramdown” is More Powerful. This is a legal term. It means you can force your creditors to accept your 3-to-5-year payment plan, even if they vote “no,” as long as the judge agrees it is “fair and equitable.”

This is the most “owner-friendly” business law that has been passed in 50 years.

How “Subchapter V” Works: A Simple 4-Step Plan

When a business is in a “death spiral,” you need a “triage” plan. Here is the plan we use.

Step 1: We File. The “Bleeding” STOPS.

The moment our firm files your Subchapter V petition, the Automatic Stay goes into effect.

This immediately stops:

• Lawsuits from vendors or suppliers.
• Bank levies on your business accounts.
• Eviction from your commercial lease.
• The “chaos” stops. You get breathing room to think.

Step 2: You (The Owner) Stay in Control

In a Subchapter V, you are a “debtor-in-possession.”

This just means you keep running your business. You keep making payroll. You keep serving your customers.

There is no outside “trustee” who comes in and takes over your company. You are still the boss.

Step 3: We Create the “Reorganization Plan”

This is the “heart” of the case. We have 90 days to create your “Plan of Reorganization.”

This is your 3-to-5-year “business plan” for survival.

In this plan, we can do powerful things:

• Restructure Loans: We can change the terms on your secured debt (like equipment loans). We can lower the interest rate, or “cram down” the balance to what the equipment is actually worth.
• Handle Leases: You can reject bad leases for equipment or locations you no longer need.
• Pay Back-Taxes: You can take your “priority” tax debt and stretch it out over 5 years.
• Pay Your “Unsecured” Creditors: Your vendors, suppliers, and credit card bills get paid “pennies on the dollar” based on what your business can afford.

Step 4: The Court “Confirms” Your Plan

We present your plan to the judge. Your creditors get to “vote,” but as we said, in a Subchapter V, a judge can confirm your plan even if they say no.

Once the judge signs off… that is your new “rulebook.”

You make your new, affordable plan payments for 3-5 years. You get your business back on its feet. At the end, your old debts are discharged.

You saved your company.

Is This the Same as a Chapter 7?

No. It is the opposite.

A Chapter 7 (for a business) is a “Liquidation.”

• It means you are closing your doors. Forever.
• A Trustee is appointed.
• The Trustee’s only job is to sell every single asset of the business (the trucks, the computers, the inventory).
• They use that cash to pay your creditors, and the business ceases to exist.

A Chapter 11 (Subchapter V) is a “Reorganization.”

• It means you are staying OPEN.
• You stay in control.
• The goal is to save the business, save the jobs, and restructure the debt.

What About High-Debt Individuals?

Chapter 11 is not just for businesses. It is also the only option for individuals who have too much debt to file a Chapter 13.

• A Chapter 13 has “debt limits.” (As of 2024, it’s ~$2.75 million).
• If your personal debts (often from real estate or large personal guarantees) are above that limit, you cannot file Chapter 13.
• In this rare case, a “Personal” Chapter 11 is your only option to reorganize, save your assets, and get a payment plan.

Why You Need an Experienced Litigation Firm

When you are searching for the “best Chapter 11 lawyer near me” in North Carolina, you cannot hire a simple “bankruptcy mill.”

A Chapter 11 is not a “form.” It is a complex, high-stakes lawsuit.

You are suing your creditors to force them to accept a new deal. They will have their own team of high-priced corporate lawyers. They will fight you.

You need a law firm that is not afraid of a courtroom.

Our firm is uniquely suited for this fight.

• Our deep background in Criminal Law means we are in the courtroom, fighting in front of judges, every single week. We are trial lawyers.
• Our experience in complex Family Law cases means we know how to “disentangle” complex, “messy” finances.
• We know how to negotiate from a position of strength, and we know how to win when the negotiation fails.

This is not a “simple” filing. This is a war for your business. You need a team of warriors on your side.