What is Subchapter V bankruptcy?

Subchapter V is a streamlined version of Chapter 11 bankruptcy created by the Small Business Reorganization Act of 2019. It allows small businesses with debts under $7.5 million to reorganize faster, cheaper, and with fewer procedural requirements than traditional Chapter 11.

How is Subchapter V different from regular Chapter 11?

Subchapter V eliminates the creditors committee, the absolute priority rule, and the disclosure statement requirement. Only the debtor can file a plan. A Sub V trustee facilitates rather than replaces management. Cases typically confirm in 4-8 months rather than 12-24 months.

Can an individual file Subchapter V?

Yes. Individuals engaged in commercial or business activities can elect Subchapter V. This includes sole proprietors, independent contractors, gig workers, and freelancers -- anyone whose debts arise primarily from business activities.

What does a Sub V trustee do?

The Sub V trustee facilitates the case -- they help negotiate with creditors, review the debtor's financials, and appear at hearings. Unlike a Chapter 7 trustee, they do not liquidate assets or take control of the business. The debtor remains in possession and continues operating.

Subchapter V Small Business Bankruptcy -- Complete Guide [2026]

What Is Subchapter V?

Subchapter V is a streamlined version of Chapter 11 bankruptcy designed specifically for small businesses. Created by the Small Business Reorganization Act (SBRA) of 2019, it took effect on February 19, 2020 -- weeks before COVID shut down the economy. The timing was accidental, but the impact was enormous.

Before SBRA, Chapter 11 was built for companies with teams of lawyers, committees of creditors, and months of procedural requirements. A small business owner filing traditional Chapter 11 faced $50,000 to $200,000+ in legal fees, a 12-24 month timeline, and the constant threat of a competing creditor plan that could strip them of their own company.

Subchapter V changed all of that. It eliminated the creditors committee, removed the absolute priority rule, appointed a facilitating trustee instead of a liquidating one, and compressed the entire process into months instead of years.

Key statute: 11 U.S.C. §§ 1181-1195 (Subchapter V -- Small Business Debtor Reorganization)

In This Guide

Do I Qualify for Subchapter V? Eligibility Requirements The Subchapter V Plan -- What You Need to Know How Much Does Subchapter V Cost? Subchapter V vs Chapter 13 -- Which Is Right for Your Business? Getting Your Discharge in Subchapter V Subchapter V FAQ -- 15+ Common Questions Answered

Who Qualifies?

To elect Subchapter V, you must be a "small business debtor" under 11 U.S.C. § 101(51D):

Debt limit: Total noncontingent, liquidated debts (secured + unsecured) must not exceed $7,500,000. This was originally $2,725,625. COVID-era legislation raised it temporarily, and the Bankruptcy Threshold Adjustment and Technical Corrections Act of 2022 made $7.5 million permanent.
Commercial activity: At least 50% of your debts must arise from commercial or business activities.
Not single asset real estate: If your primary business is owning and operating a single piece of real property, you do not qualify.
Entities and individuals: Corporations, LLCs, partnerships, and individuals engaged in business can all file.

Read the full eligibility breakdown →

What Makes Sub V Different from Traditional Chapter 11

Feature	Traditional Ch. 11	Subchapter V
Creditors committee	Appointed by default	Not appointed unless ordered
Absolute priority rule	Applies -- equity wiped if creditors not paid in full	Does not apply -- owner keeps the business
Disclosure statement	Required before soliciting votes	Not required
Who can file a plan	Debtor + creditors after exclusivity expires	Only the debtor
Plan deadline	No hard deadline (exclusivity is 120 days)	90 days from order for relief
Trustee role	No trustee unless cause (DIP)	Standing trustee appointed -- facilitates, does not control
UST quarterly fees	Based on disbursements	Not required in Sub V
Typical legal fees	$50,000-$200,000+	$4,000-$40,000
Typical timeline	12-24 months	4-8 months

The Sub V Timeline

Subchapter V moves fast. Here is what the typical timeline looks like:

Day 0: Petition filed. Automatic stay takes effect immediately. Sub V trustee assigned within days.
Day 7: Status conference with the judge and Sub V trustee (within 60 days of filing, but usually scheduled quickly).
Day 14: Sub V trustee begins reviewing financials, may request additional documents.
Day 60: Status conference deadline. The court sets plan filing and confirmation deadlines.
Day 90: Plan must be filed (11 U.S.C. § 1189(b)). Extensions possible for cause, but courts expect compliance.
Days 90-180: Creditor objections, plan negotiation, possible amendments. The Sub V trustee helps broker deals.
Days 120-240: Confirmation hearing. If creditors vote to accept, you get a consensual plan under § 1191(a). If not, the court can still confirm under § 1191(b) (cramdown).

Real-world note: The 90-day plan deadline sounds tight, but it is workable if your attorney (or you, if filing pro se) starts drafting the plan before the petition is even filed. In practice, courts routinely grant extensions of 30-60 days. But do not plan on it -- file the plan on time.

The Sub V Trustee -- Not What You Think

If you have heard horror stories about bankruptcy trustees selling your assets, forget them. The Sub V trustee is a completely different animal.

They do not take control. You remain the "debtor in possession" (DIP). You keep running your business. You keep signing the checks.
They facilitate. The trustee's job is to help you get a plan confirmed. They review your financials, attend hearings, and try to bridge gaps between you and your creditors.
They report to the court. If you are not cooperating, not filing required reports, or not negotiating in good faith, the trustee will tell the judge.
They get paid from the estate. Trustee compensation comes from plan payments -- it is a real cost to factor into your projections.

Watch out: Some Sub V trustees are more aggressive than others. A good trustee helps you reorganize. A bad one can make the process adversarial. Ask your attorney about the trustees in your district before filing.

The Plan -- Consensual vs. Cramdown

In Subchapter V, only the debtor can file a plan. No creditor can propose a competing plan to take your business away. This is one of the biggest advantages over traditional Chapter 11.

There are two paths to confirmation:

Section 1191(a) -- Consensual: All impaired classes of creditors vote to accept the plan. Discharge at confirmation. This is the best outcome.
Section 1191(b) -- Cramdown: At least one impaired class rejects the plan, but the court confirms it anyway because the plan commits all projected disposable income to unsecured creditors for 3-5 years. Discharge comes after plan completion, not at confirmation.

Read the full plan guide →

What Sub V Costs

One of the main reasons Subchapter V exists is that traditional Chapter 11 was too expensive for small businesses. Here are the real numbers:

Court filing fee: $1,738 (as of 2026)
Attorney fees: $4,000-$20,000 for straightforward cases. Complex cases with contested confirmation can run $30,000-$50,000+.
Sub V trustee compensation: Paid from plan distributions. Typically 3-10% of payments.
UST quarterly fees: Not required in Sub V (this alone can save $10,000+ compared to traditional Chapter 11).

See the full cost breakdown →

Sub V vs Chapter 13

If you are an individual business owner, you might be choosing between Subchapter V and Chapter 13. The key differences:

Debt limits: Chapter 13 caps at $2,750,000 (combined secured + unsecured as of 2024). Sub V allows up to $7.5 million.
Business ownership: Chapter 13 is for individuals only. Sub V allows entities (LLCs, corporations) to file.
Plan flexibility: Sub V plans are far more flexible than Chapter 13 plans, which must follow rigid payment formulas.
Trustees: Chapter 13 trustees collect and distribute payments. Sub V trustees facilitate -- they do not handle your money (unless the plan provides otherwise).

Read the full comparison →

Things Nobody Tells You About Sub V

The statute is one thing. Living through it is another. Here is what the legal guides leave out:

Your attorney matters more than the statute. Sub V is designed to be simpler, but a lazy or inattentive attorney can still botch the case. Missed deadlines, poorly drafted plans, and failure to communicate with the trustee are real problems. If your attorney does not know Sub V specifically -- not just "Chapter 11" -- find one who does.
The 90-day plan deadline creates pressure. You need your financial projections, creditor negotiations, and plan terms ready essentially at filing. Waiting until day 85 to start thinking about a plan is a recipe for disaster.
Creditor engagement is often low. In many Sub V cases, unsecured creditors do not bother to vote. This can actually work in your favor for consensual confirmation under § 1191(a), since non-voting classes are deemed to accept.
The trustee fee is real money. Plan for it. The trustee gets paid, and that compensation comes out of what you are already distributing to creditors. Factor it into your projections from day one.
Post-confirmation obligations continue. You do not walk away after the confirmation hearing. Depending on your plan, you may have 3-5 years of payments, reporting requirements, and annual reports to file.

Critical: If your plan is confirmed under § 1191(b) (cramdown), you do not receive your discharge until after you complete all plan payments. That can be 3-5 years of living under court supervision. Push hard for a consensual § 1191(a) confirmation if at all possible.

Related Statutory Provisions

The Subchapter V provisions span 11 U.S.C. §§ 1181 through 1195:

Section 1181 -- Inapplicability of other Chapter 11 sections
Section 1186 -- Property of the estate in Sub V
Section 1189 -- Filing of the plan (90-day deadline)
Section 1190 -- Acceptance of the plan
Section 1193 -- Modification of the plan after confirmation

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