Understanding Subchapter V Bankruptcy Debt Limits

Small business owners struggling with overwhelming debt may find relief through Subchapter V bankruptcy, a streamlined process under Chapter 11 designed to make reorganization more affordable and efficient. But to qualify, your business must meet certain requirements—most importantly, the debt limits set by federal law.

What Is Subchapter V Bankruptcy?

Subchapter V was added to the U.S. Bankruptcy Code in 2019 under the Small Business Reorganization Act (SBRA). It allows eligible small businesses to reorganize debts more quickly and with fewer administrative hurdles than a traditional Chapter 11 case.

This form of bankruptcy is especially helpful for business owners seeking to retain control of their company while working out a repayment plan with creditors.

Current Debt Limits for Subchapter V (As of 2025)

To qualify for Subchapter V bankruptcy, your total noncontingent, liquidated debts must not exceed:

• $3,024,725

This limit includes both secured and unsecured debts and applies to individuals or business entities engaged in commercial or business activities.

Who Is Eligible for Subchapter V?

• Small business debtors whose primary activity is commercial in nature.

• Individuals with business-related debt may also qualify.

• At least 50% of the debt must arise from business activities.

Benefits of Subchapter V Bankruptcy

• Faster and cheaper than a traditional Chapter 11 case.

• Debtors retain control of business operations.

• No creditor committee required in most cases.

• The plan can be approved without creditor consent, as long as it’s fair and feasible.

• Allows owners to retain equity in the business, even without full repayment to creditors.

What Happens If You Exceed the Debt Limits?

If your total debt exceeds $3,024,725 million, you may still file under standard Chapter 11, but you won’t be eligible for Subchapter V’s simplified procedures. In such cases, the process becomes more complex and costly, often requiring creditor approval and a formal disclosure statement.

Need Help Navigating Subchapter V?

At Kamini Fox, PLLC, we help small business owners determine eligibility for Subchapter V bankruptcy and develop effective strategies to reorganize and protect their business. Understanding the debt limits and qualifications is key to making the right legal decision for your financial future.

Contact us today for a consultation and find out if Subchapter V is the right path for you.