Subchapter V Cases Confirm Plans at More Than Twice the Rate of Other Small Business Chapter 11s

Among small business Chapter 11 cases filed from fiscal year 2020 through 2023, 52% of those that elected Subchapter V ended in a confirmed plan. For the other small business cases the figure was 23%. The U.S. Trustee Program's statistical summary also puts the median time to confirmation at 6.6 months for Subchapter V and 10.4 months for the comparison group.

Subchapter V confirmed 29 points more plans than other small business cases

The summary covers cases filed in U.S. Trustee districts other than Alabama and North Carolina, with results through December 31, 2024. Subchapter V cases split into 52% confirmed, 32% dismissed, 13% converted to another chapter and 3% still pending. Other small business cases split into 23% confirmed, 53% dismissed, 22% converted and 2% pending. The pre-reform record was also weak: small business cases from fiscal years 2017 through 2019 confirmed 31% of plans and were dismissed 54% of the time.

The chart sets the two groups side by side.

Subtracting one group from the other gives a confirmation share 29 points higher and a dismissal share 21 points lower for Subchapter V. Adding dismissals and conversions shows how many cases ended without a plan: 45% in Subchapter V and 75% elsewhere.

These are group comparisons. Subchapter V is an election open only to eligible debtors, so the two groups may differ in size, debt structure and viability before filing. The summary does not match cases, and it does not establish that the election caused the difference.

A 90-day plan deadline and a debtor-only plan frame the 6.6-month median

Subchapter V changes the front end of the case. Under 11 U.S.C. 1189, only the debtor may file a plan, and it is due within 90 days of the order for relief. Outside Subchapter V, the debtor-exclusive period to file is 120 days in a regular case and 180 days in a small business case. The U.S. Trustee Program adds that Subchapter V carries no quarterly U.S. Trustee fees and that a trustee is appointed in each case to help the debtor and creditors reach a consensual plan.

The table collects the outcome and timing measures for the two groups.

Fiscal years 2020 to 2023. Differences are derived from the U.S. Trustee Program figures.

The 3.8-month gap equals about 37% of the comparison group's median. The dismissal medians run the other way, so the speed advantage shows up in the cases that succeed. In both groups failures resolve before successes: the median dismissal arrives 1.7 months ahead of the median confirmation in Subchapter V and 6.2 months ahead of it elsewhere. A pending case's age therefore carries some information about its odds. That reading is an inference from two medians over different case sets, and the summary does not publish survival curves.

Subchapter V cramdown replaces the absolute priority rule with three to five years of disposable income

When every impaired class accepts, the court confirms under section 1191(a). The U.S. Trustee summary reports that 68% of confirmed Subchapter V plans were consensual, which leaves 32% confirmed without that consent. Section 1191(b) lets the court confirm over objection, on the debtor's request, if the plan does not discriminate unfairly and is fair and equitable to each non-accepting impaired class.

For unsecured classes, section 1191(c)(2) defines fair and equitable as applying all projected disposable income for three years, or a longer period of up to five that the court fixes, or distributing property worth at least that amount. An ABI Journal analysis reports that debtors usually prefer the three-year period and unsecured creditors prefer five.

The tradeoff follows from the text. A plan can be confirmed over an unsecured class's objection without the absolute priority rule, and in return it fixes a claim on several years of future cash flow whose length the court sets inside a two-year range. That makes the feasibility finding central, since the statute asks for either an ability to make all payments or a reasonable likelihood of doing so with remedies if payments fail.

The $3,424,000 debt cap decides which businesses can elect Subchapter V

As of early October 2026, the U.S. Trustee Program lists $3,424,000 as the debt limit for cases commenced on or after June 21, 2024, after the pandemic-era $7.5 million limit expired. Congress has since passed H.R. 7730, which would restore a permanent $7.5 million limit. Reports from October 3 said the bill awaited a presidential signature and that the higher limit was not yet in effect.

The proposed ceiling is about 2.2 times the current one, a difference of $4,076,000 that decides eligibility for any business with debts in that band. Use of the election is rising: first-half election counts show 1,663 Subchapter V elections in 2026 against 1,107 a year earlier. The outcome figures above come from cases under the lower caps, so no published figure yet describes how businesses with larger debts would fare.

Personal guarantees survive a company's plan, and forgiven debt can be taxable income

Section 524(e) provides that discharge of the debtor's debt does not affect the liability of any other entity on that debt, and courts have held guarantors to their promises after the borrower's reorganization. A Fifth Circuit decision allowed a plan to reduce a guarantor's exposure in a narrow setting, so the rule has edges that depend on the court. The Federal Reserve's credit survey found 38% of small firms held more than $100,000 in debt, and a summary of its findings reports that 59% of firms with debt used a personal guarantee. A plan that restructures the company's loan therefore leaves a separate question about the person who guaranteed it.

Tax treatment adds a second open item. IRS Topic 431 says canceled debt is generally taxable income unless an exclusion applies, and it lists debt canceled in a Title 11 bankruptcy case and debt canceled to the extent of insolvency as exclusions, each claimed on Form 982 with a reduction of certain tax attributes. Forgiveness negotiated outside court therefore carries a reporting question that debt discharged in a bankruptcy case answers through its own exclusion. The IRS topic is written for taxpayers generally, and entity-specific treatment falls outside it.