Subchapter V Bankruptcy
Last reviewed on April 25, 2026.
Streamlined reorganization for small businesses
What Is Subchapter V Bankruptcy?
Subchapter V is a streamlined form of Chapter 11 bankruptcy designed specifically for small businesses. Created by the Small Business Reorganization Act of 2019 (SBRA) and effective February 19, 2020, it cuts the cost, complexity, and duration of traditional Chapter 11 while still allowing a business to keep operating and restructure its debts.
- Faster than traditional Chapter 11 (3-6 months to confirmation)
- Lower attorney and professional fees
- No creditors' committee required
- No disclosure statement required
- Owner retains equity even if creditors aren't fully paid
- Only the debtor can propose a plan
Subchapter V Eligibility Requirements
To qualify for Subchapter V, you must meet all of the following:
- Debt Limit: Total non-contingent, liquidated secured and unsecured debts must be $7.5 million or less (the temporary CARES Act increase; the baseline limit is $3,024,725 and may revert)
- Business Activity: You must be engaged in commercial or business activities
- Debt Source: At least 50% of debts must arise from business activities
- Excluded Entities: Single-asset real estate debtors and publicly traded companies cannot file
- Election Required: You must affirmatively elect Subchapter V treatment in your petition
Who Can File Subchapter V?
- Small corporations (C-Corp, S-Corp)
- Limited Liability Companies (LLCs)
- Partnerships engaged in business
- Sole proprietors with business debts
- Individuals with business-related debts (subject to debt limits)
Subchapter V vs. Traditional Chapter 11
| Feature | Subchapter V | Traditional Chapter 11 |
|---|---|---|
| Debt Limit | $7.5 million | None |
| Timeline to Plan | 90 days to file plan | 120 days (exclusivity) |
| Disclosure Statement | Not required | Required |
| Creditors' Committee | Not required | Usually required |
| Subchapter V Trustee | Appointed in every case | Rare |
| Absolute Priority Rule | Does not apply | Applies |
| Owner Keeps Equity | Yes, if plan is fair | Only if creditors paid in full |
| Quarterly U.S. Trustee Fees | Not required | Required |
| Typical Cost | $15,000-$50,000 | $50,000-$500,000+ |
| Timeline to Confirmation | 3-6 months | 12-24+ months |
The Subchapter V Process
Step-by-Step Timeline:
- Filing (Day 1): Petition filed with Subchapter V election, automatic stay begins
- Trustee Appointment: U.S. Trustee appoints a Subchapter V trustee within days
- Status Conference (Day 60): Court holds status conference to address issues
- Report Filed (14 days before status conference): Debtor files report detailing efforts toward a consensual plan
- Plan Filing (Day 90): Debtor files reorganization plan — only the debtor may file
- Confirmation Hearing: Court approves consensual or non-consensual plan
- Plan Execution: Debtor makes payments under the plan (typically 3-5 years)
- Discharge: Granted upon completion (consensual) or at confirmation
Role of the Subchapter V Trustee
Every Subchapter V case includes a court-appointed trustee whose role differs from Chapter 7 or traditional Chapter 11 trustees. The Subchapter V trustee:
- Facilitates development of a consensual plan between debtor and creditors
- Appears at the status conference and plan confirmation hearing
- Monitors the debtor's operations and finances
- Does not take over operations — the debtor remains debtor-in-possession
- Distributes payments under non-consensual plans
- May investigate the debtor's financial affairs if warranted
Consensual vs. Non-Consensual Plans
Consensual Plan
At least one impaired class of creditors accepts the plan.
- Debtor makes payments directly to creditors
- Discharge granted upon plan completion
- Faster exit from bankruptcy
Non-Consensual Plan
No impaired class accepts, but plan still meets fair/equitable test.
- Subchapter V trustee distributes payments
- All disposable income must go to creditors for 3-5 years
- Discharge granted at confirmation
Subchapter V Costs
| Filing Fee: | $1,738 |
| Attorney Fees: | $15,000 - $50,000 |
| Subchapter V Trustee Fees: | Hourly, paid from estate |
| Quarterly U.S. Trustee Fees: | None (waived for Subchapter V) |
| Accountant/Advisor: | $3,000 - $15,000 |
Key Advantages of Subchapter V
Owner Retains Control
Existing ownership keeps equity even when creditors aren't paid in full — no absolute priority rule.
Lower Costs
No disclosure statement, no creditors' committee, no quarterly trustee fees.
Faster Resolution
Plan must be filed within 90 days; confirmation typically within 3-6 months.
Residential Mortgage Modification
Individuals in Subchapter V may modify mortgages on property used for business purposes.
Disadvantages of Subchapter V
- Debt limit excludes mid-sized businesses
- Only the debtor can propose a plan — no competing plans allowed
- Subchapter V trustee oversight adds some cost
- All disposable income for 3-5 years goes to creditors in non-consensual plans
- Discharge delayed until plan completion in consensual cases
Is Subchapter V Right for Your Business?
Consider Subchapter V if:
- Your total debts are under $7.5 million
- Your business is viable with reduced debt
- You want to keep ownership of the company
- You need to reject burdensome contracts or leases
- Traditional Chapter 11 is too expensive
- You want faster exit from bankruptcy
Subchapter V may not be suitable if:
- Your debts exceed the $7.5 million limit
- You're a single-asset real estate debtor
- Less than 50% of debts arose from business activity
- Your business lacks ongoing cash flow to fund a plan
- Liquidation (Chapter 7) would produce a better outcome
Common Subchapter V FAQs
How long does a Subchapter V case take?
Most Subchapter V cases reach plan confirmation within 3-6 months of filing. Plan payments typically run 3-5 years after confirmation.
Can I keep my business during Subchapter V?
Yes. Subchapter V is designed to let you keep operating. You remain in control as "debtor-in-possession" while restructuring debts.
Does Subchapter V discharge all business debts?
Generally yes, after plan completion in consensual cases, or at confirmation in non-consensual cases. Certain categories (fraud, fiduciary breach, recent taxes) may be non-dischargeable.
Can a sole proprietor file Subchapter V?
Yes, individuals engaged in business activity may file Subchapter V if at least 50% of their debts come from business operations and total debts are within the limit.
What happens if I exceed the $7.5 million debt limit later?
Eligibility is determined on the petition date. If your debts grow after filing, the case continues under Subchapter V. If you're over the limit when filing, you must use traditional Chapter 11.