Rudolph J. DiMassa Jr., left, and Drew McGherin, right, of Duane Morris.

Court Opens Door for Widespread Eligibility Under Subchapter V of Bankruptcy Code

In In re Ellingsworth Residential Community Association, the U.S. Bankruptcy Court for the Middle District of Florida determined that a nonprofit community association engaged in the requisite "commercial or business activities" sufficient to qualify it as a "small business debtor" for purposes of filing a Chapter 11 petition under Subchapter V of the Bankruptcy Code.

November 12, 2020 at 01:03 PM

7 minute read

Rudolph J. Di Massa Jr.

Drew S. McGehrin

Introduction

In In re Ellingsworth Residential Community Association, the U.S. Bankruptcy Court for the Middle District of Florida determined that a nonprofit community association engaged in the requisite "commercial or business activities" sufficient to qualify it as a "small business debtor" for purposes of filing a Chapter 11 petition under Subchapter V of the Bankruptcy Code. In so holding, the court determined that "any person who conducts a business or commercial enterprise is a small business debtor," interpreting the eligibility for relief under this provision broadly. If other courts follow the rationale of the Ellingsworth court, we could soon be witness to a widespread application of Subchapter V of the Bankruptcy Code as the effects of the global COVID-19 pandemic ripple into the future.