Small Business Bankruptcy: Chapter 11 vs. Subchapter V

For small business owners facing unmanageable debt, bankruptcy offers a path to restructure and survive — but the right chapter depends heavily on the size and nature of your business. In 2025, 9,201 Chapter 11 cases were filed in the United States, according to the Administrative Office of the U.S. Courts.¹ A significant and growing proportion of those were filed under Subchapter V — a streamlined small business track enacted in 2019.

Standard Chapter 11: Powerful but Complex

Standard Chapter 11 reorganization allows a business to continue operating while restructuring its debts under court supervision. The debtor proposes a reorganization plan that creditors vote on. If approved, the plan governs how debts are repaid over time.

The challenge: standard Chapter 11 is expensive, time-consuming, and procedurally complex. Legal fees in a standard Chapter 11 case routinely exceed $100,000–$500,000. The process involves extensive disclosure requirements, creditor committees, and plan voting — burdens that can be prohibitive for small businesses.

Subchapter V: The Small Business Solution

Subchapter V of Chapter 11 was enacted by the Small Business Reorganization Act of 2019 (SBRA) and took effect February 19, 2020. It was designed specifically to make Chapter 11 reorganization accessible to small businesses by streamlining the process and reducing costs.

Key differences from standard Chapter 11:

Feature	Standard Chapter 11	Subchapter V
Creditor committee	Required (adds cost)	Not required
Disclosure statement	Required (extensive)	Not required
Plan voting	Creditors vote on plan	Court can confirm over creditor objection
Trustee appointed	Only if debtor removed	Always (standing trustee)
Plan timeline	No fixed deadline	Plan must be filed within 90 days
Owner retains equity	Only if creditors paid in full or consent	Can retain equity without paying unsecured creditors in full
Typical legal cost	$100K–$500K+	$20K–$80K

Subchapter V Eligibility: The Debt Limit

To qualify for Subchapter V, a debtor must be a "small business debtor" — defined as a person or entity engaged in commercial activity with total noncontingent liquidated secured and unsecured debts of $7,500,000 or less (as of 2023; confirm current limit with your attorney, as Congress has adjusted this threshold multiple times).² At least 50 percent of the debt must have arisen from commercial or business activities.

Importantly, single-asset real estate debtors and publicly traded companies are not eligible for Subchapter V.

The Subchapter V Plan: Key Features

The Subchapter V plan must be filed within 90 days of the petition date (extendable for cause). The plan must:

• Provide for payment of all priority claims in full
• Commit all "projected disposable income" for 3–5 years to plan payments
• Be "fair and equitable" to each class of creditors

The most significant advantage: a Subchapter V plan can be confirmed by the court even if unsecured creditors vote against it — as long as the plan does not discriminate unfairly and the debtor commits all disposable income to the plan. This "cramdown" without consent is not available in standard Chapter 11.

Chapter 7 Liquidation: When Reorganization Is Not Viable

If a business cannot generate sufficient cash flow to support a reorganization plan, Chapter 7 liquidation may be the appropriate option. A Chapter 7 trustee takes over the business, liquidates assets, and distributes proceeds to creditors. The business ceases to operate. Business owners should be aware that Chapter 7 for a business does not discharge the owners' personal liability for personally guaranteed debts — a separate personal bankruptcy filing may be needed.

Next Steps

Small business bankruptcy is a specialized area requiring an attorney with experience in both business law and bankruptcy. The choice between Subchapter V, standard Chapter 11, and Chapter 7 depends on your cash flow, debt structure, and business viability.

Find a bankruptcy attorney experienced in small business cases →