Subchapter V Bankruptcy

Difficult times call for difficult decisions. However for a small business considering bankruptcy., the lengthy process and expense may only add insult to injury. Subchapter V bankruptcy can help you get out of debt.

Because each bankruptcy case is unique, filing for Subchapter V can be risky if you don’t have proper planning, consideration, and experience. The Subchapter 7 bankruptcy lawyers at Middlebrooks Shapiro, P.C. are here for you. They’ll listen to you, focus on the big picture, and give the guidance you need to get through this very difficult time.

Ready for a fresh start? Let us help you. Schedule your free Subchapter V bankruptcy consultation today!

What Is Subchapter V Bankruptcy?

Subchapter V is a type of reorganization bankruptcy focused on small businesses through the Small Business Reorganization Act of 2019.

Subchapter V took effect on February 19, 2020, under the Small Business Reorganization Act of 2019 (SBRA), and streamlined the existing rules governing small business reorganization under Chapter 11 of the Bankruptcy Code.

The goals of Subchapter V are to speed up reorganization and reduce the cost of bankruptcy reorganization under Chapter 11. These goals are to be accomplished with the assistance of a Subchapter V Bankruptcy Trustee.


Small businesses and some individuals may voluntarily elect to proceed under Subchapter V, if they were engaged in commercial or business activity with total secured and unsecured debtors of no more than $2,725.625. This debt limit was temporarily increased to $7,500,00 under the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act).

Potential Subchapter V debtors must show that at least half of their pre-petition debts arose from commercial or business activities. Only those businesses defined as a “single asset real estate” debtor, meaning they derive substantially all income from the operation of a single piece of real estate, do not qualify for Subchapter V.

Subchapter V is started by filing a Chapter 11 bankruptcy petition with a bankruptcy court. After filing their Chapter 11 petition and electing Subchapter V, the small business debtor must file a recent balance sheet, a statement of operations, a cash flow statement, a federal tax return, or a sworn statement that those documents do not exist.

Only a Subchapter V small business debtor may file a plan of reorganization, but it must file that plan within 90 days of the date it files its petition.

A trustee is appointed to every Subchapter V case in order to help a small business debtor formulate a plan of reorganization. Subchapter V trustees serve similar roles to Chapter 13 trustees, as they have the authority to review the small business debtor’s finances and can be heard by the bankruptcy court at the confirmation hearing.

A Subchapter V trustee may also object to proofs of claim filed by creditors, and may even operate the small business debtor, if it is removed, as a debtor-in-possession. Once a Subchapter V plan of reorganization is substantially consummated, the Subchapter V trustee’s role is terminated.

About Middlebrooks Shapiro

New Jersey Attorney Melinda D. Middlebrooks and Attorney Joseph M. Shapiro have over 30 years of bankruptcy law experience. From our office in Springfield, NJ, we help clients with the most basic or complex personal and business bankruptcy cases by leading them through the legal process of numerous practice areas.

Call 973-218-6877 to speak with the experienced bankruptcy attorneys at Middlebrooks Shapiro. We’ll ensure you get the perspective you need to understand the full picture and the right guidance to have a successful bankruptcy, rebuild your credit, and move forward with your new debt-free business.