Subchapter V Bankruptcy Explained
How Florida Small Businesses Reorganize Debt and Stay Open
TL;DR / Direct Answer: Subchapter V is a fast-track version of Chapter 11 built for small businesses with $3,424,000 or less in qualifying debt. It eliminates the creditor vote requirement, removes quarterly U.S. Trustee fees, and forces a reorganization plan within 90 days — letting you keep the business open and under your ownership while legacy debt gets restructured into a manageable 3-to-5-year plan.
If you own a small business in Central Florida and you've started Googling "subchapter v bankruptcy," there's a good chance someone — an accountant, another business owner, maybe a late-night search — pointed you toward it as an alternative to just closing your doors. That instinct is usually correct. Subchapter V is one of the most underused tools in the federal bankruptcy code, and most small business owners have never even heard of it until they're already in financial trouble.
This guide walks through exactly who qualifies under the current rules, how it compares to a traditional Chapter 11 filing, and what the process looks like from the day you file to the day your plan is complete. If your business isn't salvageable at all, it's also worth understanding how a Chapter 7 filing compares.
Do You Qualify for Subchapter V?
1. The Debt Cap
Your total noncontingent, liquidated secured and unsecured business debt must fall at or under the current statutory limit.
- $3,424,000 or less at the time you file — the inflation-adjusted limit effective since April 1, 2025.
- Watch this number: there's pending legislation in Congress that could raise it back toward the $7.5M level that applied temporarily under the CARES Act.
2. Commercial Origin
At least half of your total debt has to trace back to business activity, not personal spending.
- 50% or more of your debt must come from business or commercial activity.
- This is what allows sole proprietors and individual guarantors to qualify, not just incorporated companies.
3. Private Entity Status
Subchapter V is built for privately held small businesses, not public companies.
- You cannot be a publicly traded company or an affiliate of one.
- LLCs, partnerships, and small corporations of any size under the debt cap all qualify.
If you clear those three bars, you're eligible — regardless of whether you're a single-owner LLC, a partnership, or a small corporation.
Not Sure If You Qualify?
Debt-cap and commercial-origin calculations get complicated fast, especially if some of your debt is personally guaranteed or tied to a business that already closed. A Subchapter V attorney can walk through your specific numbers on a free initial call before you make any other moves.
How Is Subchapter V Different From a Standard Chapter 11?
Standard Chapter 11
- Creditors' committee is common and can slow the case significantly.
- Creditors usually have to vote to confirm the plan.
- Quarterly U.S. Trustee fees apply and scale with disbursements.
- No fixed deadline to file a plan — cases can run for years.
- Legal and administrative costs are often six figures.
Subchapter V
- Creditors' committee is eliminated in most cases.
- No creditor vote required — the court can confirm a fair plan over objection.
- No quarterly U.S. Trustee fees, ever.
- 90-day deadline to file your reorganization plan.
- Costs are a fraction of a standard Chapter 11, in most cases.
The single biggest practical difference is the elimination of the creditor vote requirement. In a standard Chapter 11, if your creditors don't like your plan, they can vote it down and drag the case out. In Subchapter V, as long as the plan commits your projected disposable income over three to five years and treats creditors fairly, the court can confirm it even if creditors object. That one change is what makes Subchapter V fast enough for a small business to actually survive the process.
How the Process Works, Step by Step
- Filing and the automatic stay. The moment your petition is filed, the automatic stay takes effect. Lawsuits, collection calls, repossession efforts, and lease terminations related to your debts stop immediately.
- You stay in control. You continue operating as "debtor in possession." A Subchapter V trustee is appointed, but their job is to help facilitate a workable plan and monitor the case — not to take over your operations the way a Chapter 7 trustee would in a liquidation.
- Status conference within 60 days. The court holds an early conference to check on progress and keep the case moving.
- Plan filed within 90 days. Your attorney files a reorganization plan laying out exactly how creditors get paid based on your actual projected business income.
- Confirmation. If the plan is fair and feasible, the court can confirm it — without needing creditors to vote yes.
- Plan term and discharge. You make payments under the plan for three to five years. At the end, remaining eligible unsecured debt covered by the plan is discharged, and you keep the business.
Is Subchapter V the Right Move for Your Business?
The honest test is this: if you stripped away your old debt today, would the business be profitable? If your revenue is real and it's legacy debt — a bad lease, a merchant cash advance, back rent from a slow season — dragging you down, Subchapter V is built for exactly that situation. If the underlying business model isn't working anymore, a Chapter 7 filing that lets you wind down cleanly and start fresh personally might be the more honest answer. Central Florida's restaurants, construction and trucking companies, medical practices, and retail businesses all show up in Subchapter V filings for a reason — debt problems in these industries are usually about a specific bad stretch, not a broken business model.
Frequently Asked Questions
What is the current Subchapter V debt limit?
$3,424,000 in total noncontingent, liquidated business debt, effective for cases filed on or after April 1, 2025. This number adjusts periodically for inflation, and there's pending legislation that could raise it further — we track these changes closely.
Can I file Subchapter V as an individual, not a corporation?
Yes, if at least 50% of your personal debt comes from business or commercial activity — including debt from a business that has already closed.
Do I lose control of my business during the case?
No. You remain the debtor in possession throughout. The Subchapter V trustee's role is to help the case move toward a confirmable plan, not to run your operations.
How long does a Subchapter V case take?
The plan itself must be filed within 90 days of your petition, and the repayment plan typically runs three to five years. That's a firm, predictable timeline compared to a standard Chapter 11, which can run considerably longer.
What happens if my debt is over the $3,424,000 limit?
You'd fall back to a traditional Chapter 11 reorganization, which is still an option — it just comes with more procedural cost and, usually, a longer timeline.
Is Subchapter V only for corporations?
No. Sole proprietors, partnerships, LLCs, and small corporations can all qualify, as long as they meet the debt-cap and commercial-origin tests above.
Find Out If Subchapter V Can Save Your Business
Stop guessing and start planning. Speak directly with our legal team to review your business debt and determine your eligibility, in English or Spanish.
This article is for general educational purposes and does not constitute legal advice or create an attorney-client relationship. Every business's financial situation is different — consult a licensed attorney about your specific circumstances. Juan Burgos Law is a federally designated debt relief agency under applicable federal guidelines.
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Lo recomiendo 100 % a cualquier persona que necesite un abogado de bancarrota responsable, comprometido y verdaderamente interesado en ayudar a sus clientes.
¡Mil gracias por todo, abogado Burgos!