Joseph C. Barsalona II Quoted in The Deal, “Creativemass Pioneers Prepack Use in Subchapter V”

Joseph C. Barsalona II, partner in the Bankruptcy, Restructuring and Creditors’ Rights practice at Pashman Stein Walder Hayden P.C., was recently quoted in an article in The Deal titled, “Creativemass Pioneers Prepack Use in Subchapter V.” The article discusses how Creativemass Holdings Inc., a wealth management software developer and licensor, secured court approval for one of the first known prepackaged Subchapter V liquidation plan. Pashman Stein is debtor counsel to Creativemass and its affiliated debtor.

"If you can get it done, this is 100% the way to go, but of course, there's a lot of threshold issues you have to resolve. This was a perfect set of facts to pull it off," said Barsalona.

Although there is interest in reinstating the $7.5 million Subchapter V debt limit, and potentially increasing it to $10 million, progress has stalled as Congress remains preoccupied with other priorities. Meanwhile, ongoing pressures such as tariffs, economic uncertainty, and high interest rates have continued to strain middle market companies, many of which no longer qualify for Subchapter V and are experiencing less favorable restructuring outcomes.

Data shows that commercial bankruptcies rose sharply in May, reaching 733, a 62% increase from April’s total of 453. Subchapter V filings, however, grew more modestly, increasing by just 3% from 223 to 228.

"Unfortunately, that threshold continues to do a lot of damage to the companies that were eligible for it, and they've lost my number," said Barsalona.

"They're now either going to wind down, get foreclosed on by secured debt holders or do an out-of-court liquidation, [which is] very risky," Barsalona added.

Joseph C. Barsalona II, Michael J. Custer and Alexis R. Gambale are counsel to Creativemass and its affiliated debtor.