Subchapter V


In August 2019, the Small Business Reorganization Act of 2019 added subchapter V to Chapter 11 of the Bankruptcy Code. Subchapter V, which took effect in February 2020, is reserved exclusively for the small business debtor with the purpose of expediting bankruptcy procedure and economically resolving small business bankruptcy cases.
Subchapter V retains many of the advantages of a traditional Chapter 11 case without the unnecessary procedural burdens and costs. It seeks to increase the debtor's ability to negotiate a successful reorganization and retain control of the business and increase oversight and ensure a quick reorganization.
A Subchapter V case contrasts from a traditional Chapter 11 in several key aspects: It's earmarked only for the “small business debtor”, so, only a debtor can file a plan of reorganization. The SBRA requires the U.S. Trustee appoint a “subchapter V trustee” to every Subchapter V case to supervise and control estate funds, and facilitate the development of a consensual plan. It also eliminates automatic appointment of an official committee of unsecured creditors and abolishes quarterly fees usually paid to the U.S. Trustee throughout the case. Most notably, Subchapter V allows the small business owner to retain their equity in the business so long as the reorganization plan does not discriminate unfairly and is fair and equitable with respect to each class of claims or interests.