If you’ve been told you don’t qualify for Chapter 7 or Chapter 13 — especially because of high business debt — you may have another option:
Subchapter V of Chapter 11.
It was created to make bankruptcy more practical and affordable for small business owners and individuals with primarily business-related debt.
Let’s break it down in simple terms.
📌 What Is Subchapter V?
Subchapter V is a streamlined version of Chapter 11 bankruptcy designed for:
- Small business owners
- Individuals with significant business debt
- People who exceed Chapter 13 debt limits
- Owners who personally guaranteed business loans
It allows you to restructure debt without the complexity and cost of traditional Chapter 11.
🏢 Who Qualifies for Subchapter V?
To qualify, you must:
✔ Be engaged in commercial or business activity
✔ Have total debts under the current statutory cap (adjusted periodically — currently in the multi-million dollar range)
✔ Have at least 50% of your debt tied to business activity
This is often ideal for:
- Contractors
- Real estate investors
- Franchise owners
- Medical or dental practices
- Retail or service business owners
- Anyone who signed personal guarantees on business loans
⚖️ How Is Subchapter V Different From Regular Chapter 11?
Subchapter V was created to fix the biggest complaints about Chapter 11:
| Traditional Chapter 11 | Subchapter V |
|---|---|
| Expensive | More cost-controlled |
| Creditor voting required | Plan can be confirmed without creditor vote in many cases |
| Disclosure statement required | Usually eliminated |
| Committee of creditors often appointed | Rare in Sub V |
| Lengthy process | Faster timeline |
It’s designed to reduce legal fees and speed up restructuring.
💰 What Does Subchapter V Allow You to Do?
Subchapter V allows you to:
- Restructure large secured and unsecured business debt
- Stretch payments over 3–5 years
- Reduce certain unsecured balances
- Modify payment terms
- Potentially cram down certain secured debts
- Keep your business operating
In many cases, it allows business owners to keep control while reorganizing.
📉 What Happens to Unsecured Debt?
Unsecured creditors (like vendors or business credit cards) may receive:
- Partial repayment over time
- A percentage of disposable income
- Less than the full balance owed
Unlike Chapter 13, there is no strict debt cap forcing you out of eligibility once you qualify.
🏠 Can Individuals Use Subchapter V?
Yes — even if you are not currently operating a business.
If your debt primarily arose from business activity (such as personal guarantees), you may still qualify.
Many high-debt individuals who exceed Chapter 13 limits use Subchapter V as a restructuring tool.
⏳ How Long Does It Last?
Typically:
- A repayment plan runs 3 to 5 years
- You make payments based on projected disposable income
- At completion, qualifying debts are discharged
💵 Is It Expensive?
Subchapter V is generally:
- Less expensive than traditional Chapter 11
- More expensive than Chapter 7
- Often more expensive than Chapter 13
However, when you are dealing with high six-figure or seven-figure debt, it can be the most practical solution.
Cost depends heavily on complexity.
🚩 When Subchapter V Makes Sense
Subchapter V may be appropriate if:
- You exceed Chapter 13 debt limits
- You have large personal guarantees
- You want to keep operating your business
- You need structured repayment over time
- You have significant secured debt that needs modification
❓ When It May Not Be the Best Fit
It may not be ideal if:
- You have primarily consumer (non-business) debt
- Your income is too unstable to fund a plan
- Liquidation (Chapter 7) is available and simpler
📌 The Bottom Line
Subchapter V is not just “corporate bankruptcy.”
It is a powerful restructuring tool for:
- Small business owners
- High-debt individuals
- People who exceed Chapter 13 limits
If you’ve been told you have “too much debt” for bankruptcy, Subchapter V may be the chapter that fits.
Bankruptcy law is more flexible than most people realize — but strategy matters.
