Subchapter V of Chapter 11 of the United States Bankruptcy Code was signed into law through the Small Business Reorganization Act (SBRA) in August 2019 and took effect in February 2020. The intent of Subchapter 5 Small Business Bankruptcy was to provide a more streamlined and less costly alternative to small businesses to reorganize and confirm a Business Bankruptcy Plan. One of our New Jersey small business bankruptcy lawyers could help you in this situation.

SubChapter V (SubChapter 5) Small Business Bankruptcy

Before the enactment of the SBRA, a small businesses could reorganize its debt through a Chapter 11 Bankruptcy case. The requirements in a Chapter 11 case are often costly and onerous for a small business. Imagine your local restaurant filing the same documents as large companies such as GM, Macy’s or JC Penny’s.

The recent enactment of the Small Business Reorganization Act (SBRA) created a “new” type of reorganization for small businesses under Sub-Chapter V. A business debtor files a Chapter 11 bankruptcy petition and the elects Subchapter V treatment.

A business debtor with non-contingent, secured and unsecured debt less than $2,725,625 may elect Subchapter V treatment.  Note: under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, Congress increased the cap to $7,500,000 for at least one year from its effective date of March 27, 2020.


Subchapter V offers similar options to small business debtors that Chapter 13 Bankruptcy cases offer to individuals and married couples.

Much like a Chapter 13 bankruptcy case, a small business debtor electing Subchapter V treatment may spread debt repayment over 3 to 5 years, during which time the debtor must devote its projected disposable income to creditors.

Also, to make the cost of the case more efficient to a small business, a Small Business Subchapter 5 Plan may pay administrative expenses, including attorneys and other professional fees, over the 3 to 5 years. In Chapter 11 bankruptcy cases, these amounts must typically paid at the time of confirmation of the plan.

A small business debtor electing Subchapter V treatment discharges debt under a confirmed plan after completion of the payments.



Sub-Chapter V does not require that the Debtor prepare and file a Disclosure Statement with the Court. A Chapter 11 Disclosure Statement is a highly detailed document providing creditors with information about the debtor’s business to vote informatively for or against the proposed Plan. The time required to prepare a Disclosure Statement is substantial.

No longer having to file a disclosure statement, the small business debtor in a Sub-Chapter V will save on the expense of having to pay professionals, its attorney and accountant, to prepare this document. This could result in thousands of dollars of savings on fees and expenses for the small business debtor.

FILE SUBCHAPTER V Plan within 90 days of petition filing

The small business debtor in a Subchapter V bankruptcy must file a Plan within 90 days of the bankruptcy petition. The Bankruptcy Court may extend the deadline only due to circumstances beyond the control of the debtor. The Plan must include certain information typically found in a disclosure statement. For instance, it must include history of the business operations, a liquidation analysis, and projections of ability of the debtor to make payments under the plan.

In a chapter 11 small business debtor case, the Debtor has exclusive right to file its Plan within the first 120 days of the filing of the bankruptcy petition. The Court may extend the 120-day deadline if the debtor shows that it is reasonably likely a plan will be filed and confirmed.

In a Chapter 11 case, the attorney and the business spend significant time negotiating with creditors in an attempt to gain the creditor’s consent to their treatment under the Plan. Thus, by expediting this process and removing the need to solicit approval of creditors to confirm a Plan, the confirmation process under Sub-Chapter V should be much more cost-efficient for the small business debtor.

Move Towards Relief with a New Jersey Small Business Bankruptcy Attorney

Call Gillman, Bruton & Capone to speak with a New Jersey small business bankruptcy lawyer to learn more.