Subchapter V

Subchapter V Small Business Reorganizations

The Small Business Reorganization Act of 2019 (SBRA) was enacted on August 23, 2019, with an effective date of February 19, 2020.  Pub. L. No. 116-54 (2019).  Upon enactment, small business debtors with less than about $2.75 million in debts (to be adjusted at 3-year intervals per 11 U.S.C. § 104) could voluntarily elect to proceed under a new subchapter V of chapter 11 of the Bankruptcy Code if they met certain eligibility criteria.  Shortly thereafter, the CARES Act increased this debt limit to $7.5 million, for cases pending, commenced on, or commenced after March 27, 2020, which increase was then further extended by two additional acts until June 21, 2024.  See Pub. L. No. 116-136 (2020), as amended by Pub. L. No. 117-5 (2021), as further amended by Pub. L. No. 115-151 (2002).  The extension that increased the debt limit applicable to subchapter V cases to $7.5 million expired on June 21, 2024.  Accordingly, for subchapter V cases commenced on or after June 21, 2024, the applicable debt limit is the original limit enacted in the SBRA, as adjusted per 11 U.S.C. § 104, or $3,024,725.

Subchapter V imposes shorter deadlines for filing reorganization plans, allows for greater flexibility in negotiating restructuring plans with creditors, and does not require the payment of United States Trustee quarterly fees. Unlike in other chapter 11 cases, the United States Trustee Program appoints a trustee in each subchapter V case. The trustee works with the small business debtor and the creditors to facilitate the development of a consensual plan of reorganization, which may include evaluating the viability of the debtor’s business and investigating the debtor’s financial condition and conduct if directed by the court.

The USTP publishes a summary of statistical results from subchapter V cases.