Chapter 11 & Subchapter V Bankruptcy FAQ

Chapter 11 is the bankruptcy chapter built for reorganizing debt rather than liquidating it. It’s available to businesses and, in some cases, individuals whose debt is too large or too complex for Chapter 13.

Instead of selling off assets to pay creditors, a Chapter 11 debtor proposes a plan of reorganization that restructures debt, often paying creditors over several years while the business keeps operating.

Traditional Chapter 11 is expensive and procedurally heavy, with creditor committees, detailed disclosure statements, and a confirmation process that can take a year or more. That’s part of why Congress created Subchapter V.

Subchapter V is a streamlined version of Chapter 11 created specifically for small businesses. It strips out much of the cost and complexity of a traditional Chapter 11 case.

Under Subchapter V, there’s no creditor committee in most cases, no separate disclosure statement requirement, and a trustee is appointed to oversee the case and help facilitate a plan, though that trustee doesn’t run your business the way a Chapter 7 trustee would.

Only the business owner can propose a plan in Subchapter V, and there’s no requirement that an impaired class of creditors vote to approve it, which removes one of the biggest obstacles in traditional Chapter 11 cases.

For an eligible small business, Subchapter V is almost always faster and significantly less expensive than traditional Chapter 11.

Eligibility depends mainly on your total debt. As of this writing, a business qualifies for Subchapter V if its aggregate noncontingent, liquidated secured and unsecured debt is no more than $3,424,000, a figure that took effect April 1, 2025, and adjusts periodically for inflation.

Congress has debated raising this limit back to $7.5 million, where it stood temporarily during the pandemic before that increase expired in 2024. As of mid-2026, that change has been proposed but has not become law, so confirm the current figure with me before assuming you qualify.

Beyond the debt limit, you generally need to be engaged in commercial or business activity, and at least half of your debt needs to come from that business activity.

If your debt exceeds the Subchapter V cap, you can still file traditional Chapter 11. It simply comes with more procedural requirements and cost.

Chapter 11 or Subchapter V makes sense when your debt is too large for Chapter 13’s limits, when you need to keep a business operating while restructuring its debt, or when you have complex contracts, leases, or multiple classes of creditors that a personal bankruptcy chapter isn’t built to handle.

Individuals with debt above Chapter 13’s eligibility limits sometimes use Chapter 11 personally, though this is less common and usually involves significant assets or complex finances.

If you’re a small business owner with debt under the Subchapter V cap and you want to keep operating, Subchapter V is usually the more efficient route compared to traditional Chapter 11.

If your personal finances are the real problem and your business is small enough that personal bankruptcy can address it, Chapter 7 or Chapter 13 may be simpler and cheaper. This is exactly the kind of judgment call worth making in a consultation rather than guessing.

Subchapter V cases move considerably faster than traditional Chapter 11. You’re required to file a plan within 90 days of filing, unless the court extends that deadline for cause, and many Subchapter V cases reach a confirmed plan within six months to a year.

Traditional Chapter 11 cases have no equivalent fast deadline and often take a year or more from filing to a confirmed plan, longer in cases with contested issues, multiple creditor classes, or complex assets.

Once a plan is confirmed, you then make payments under that plan, often over three to five years, similar in spirit to a Chapter 13 plan but tailored to your business’s situation.

Every case’s timeline depends on the complexity of your debt structure and how cooperative your creditors are.

In most cases, no. Both traditional Chapter 11 and Subchapter V generally let the existing owners and management keep running daily operations as a “debtor in possession,” without a trustee taking over the business.

In Subchapter V specifically, the court appoints a trustee, but that trustee’s role is to help facilitate the case and oversee plan payments, not to manage your business.

A trustee can be appointed to take over operations in either chapter, but this happens only in cases involving fraud, gross mismanagement, or similarly serious problems. For most honest business owners reorganizing in good faith, you stay in control.

If your business files Chapter 11 or Subchapter V, the SBA loan itself gets addressed through your plan of reorganization, the same as other business debt, secured or unsecured depending on whether collateral backs it.

Your personal guarantee is a separate obligation, owed by you individually rather than the business. A business bankruptcy doesn’t discharge your personal guarantee unless you personally file too.

If you’ve personally guaranteed an SBA loan and the business is reorganizing, you need a strategy for the personal guarantee as well, which sometimes means a personal Chapter 7 or Chapter 13 filing alongside the business case, and sometimes means negotiating directly with the lender.

I help business owners address both sides of this problem, the business debt and the personal guarantee, together rather than in isolation.

Yes. Individuals can file Chapter 11, though it’s far less common than Chapter 7 or Chapter 13 because most individuals fall within Chapter 13’s debt limits.

Individuals typically use Chapter 11 when their debt exceeds Chapter 13’s eligibility caps, or when they have complex financial situations, multiple income sources, business interests, or significant assets, that don’t fit neatly into Chapter 13’s framework.

Individuals can also qualify for Subchapter V in some circumstances if they meet the business activity and debt requirements, which can make an individual Chapter 11 case faster and less expensive than it would otherwise be.

Cost varies more in Chapter 11 and Subchapter V than in personal bankruptcy chapters, because it depends heavily on the complexity of your debt, the number of creditors, and how much litigation, if any, the case involves.

Subchapter V is generally far less expensive than traditional Chapter 11, because it eliminates many of the procedural steps, creditor committees, and disclosure requirements that drive up traditional Chapter 11 costs.
Court filing fees for Chapter 11 cases are higher than Chapter 7 or Chapter 13 filing fees and vary depending on whether your case is filed as a Subchapter V case.

I’ll give you a specific, honest cost estimate once I understand your business’s debt structure and goals. This isn’t a one-size-fits-all number; instead, it’s based on how much time and effort will be required to see your case through.

A plan of reorganization is the document that spells out how you’ll pay your creditors going forward, how much, over what time period, and in what order of priority.

In traditional Chapter 11, creditors are grouped into classes, and at least one impaired class generally has to vote to accept the plan before the court can confirm it. This voting process is one of the biggest sources of cost and delay in traditional cases.

In Subchapter V, only the business owner can propose the plan, and the court can confirm it without a creditor vote, as long as the plan meets the legal requirements for fairness to creditors, including paying creditors at least what they’d receive in a liquidation.

Once confirmed, the plan becomes legally binding on you and your creditors, and you make payments under its terms going forward.

Yes. Chapter 11 gives you tools to address burdensome commercial leases that a Chapter 7 or Chapter 13 case doesn’t offer in the same way.

You can assume a lease, keeping it in place on its current terms, or reject it, which treats the landlord’s claim for the remaining lease term as a debt to be addressed through your plan rather than an obligation you have to keep paying in full.

This flexibility is one of the most valuable tools Chapter 11 offers a struggling business with locations or leases it can no longer afford, letting you shed the leases that don’t work while keeping the ones that do.

Filing Chapter 11 or Subchapter V doesn’t automatically terminate your employees or your contracts. Your business generally keeps operating, which means continuing payroll and most day-to-day vendor and customer relationships.

Executory contracts, agreements where both sides still have meaningful obligations left to perform, can be assumed or rejected through the bankruptcy process, similar to how leases are handled.

Wages owed to employees for work performed shortly before filing often receive priority treatment under the Bankruptcy Code, meaning they get paid ahead of most other unsecured debt.

Every contract and employment situation is different, so I review your specific agreements as part of building your case strategy.

Yes, in most circumstances. If reorganization isn’t working, you generally have the right to convert your Chapter 11 or Subchapter V case to a Chapter 7 liquidation.

Converting to Chapter 13 is also possible for individuals, if your debt falls within Chapter 13’s eligibility limits at the time of conversion.

Conversion isn’t something to take lightly. It changes how your creditors get treated and what happens to your remaining assets, so it’s a decision to make with legal advice based on where your case actually stands.

This depends on whether the real problem is the business or your personal finances, and whether you want the business to keep operating.

If your business has ongoing value, real revenue, real customers, and a path to profitability once its debt load is fixed, Subchapter V lets you keep it running while reorganizing the debt around it.

If your business has run its course and you simply want to close it and address what’s left personally, particularly debt you’ve personally guaranteed, a personal Chapter 7 or Chapter 13 may be simpler and considerably less expensive than a business reorganization.

This is one of the most important judgment calls I help business owners make, because the wrong choice can mean spending money reorganizing a business that was never going to survive or closing a business that could have been saved.

Call me before you make any major business decisions, make any out-of-the-ordinary transfers, sell assets, pay down certain creditors over others, or take out new financing. Some pre-filing decisions can create real complications once a case is filed.

Bring your business financials to the consultation: your debt list with amounts and whether each debt is secured, your recent profit and loss statements, your major contracts and leases, and a clear picture of who your key creditors are.

I’ll evaluate whether your business qualifies for Subchapter V, whether reorganization makes sense at all given your numbers, and what the realistic alternatives are, including the option of closing the business and addressing what’s left personally.

This consultation is free and confidential, the same as any other consultation at my office.

Less than most owners fear. A Chapter 11 or Subchapter V filing is public, but for most small businesses it doesn’t trigger the reaction owners worry about.

Your business keeps operating. You keep serving customers, paying employees, and dealing with vendors. Many vendors actually prefer a reorganizing customer who keeps buying over one who disappears or stops paying entirely.

Subchapter V was built to be faster and quieter than traditional Chapter 11, with fewer proceedings and no creditor committee in most cases. The point is to fix the debt and keep the business running, not to broadcast the problem.

How you communicate with key customers and vendors is part of the strategy. I help business owners plan that messaging before filing, not scramble after.

What happens to my business bank accounts when I file Chapter 11?

You generally keep operating your accounts, but under new rules. As a debtor in possession, you typically have to open new debtor-in-possession accounts and run all your business income and expenses through them.

These accounts let the court and the trustee see the money moving in and out of your business, which is part of the transparency that comes with reorganizing under court protection.

You still pay your ordinary operating expenses, payroll, rent, utilities, and suppliers, in the normal course of business. What changes is the recordkeeping and reporting, not your ability to run the company.

I set this up with you as part of filing, so you’re compliant from day one and your cash flow keeps moving.