What Is Section 1191?
Section 1191, added by the Small Business Reorganization Act of 2019, governs plan confirmation in Subchapter V cases. Two paths: consensual (1191(a)) and cramdown (1191(b)).
1191(a) -- Consensual Confirmation
All impaired classes accept. The absolute priority rule does not apply -- the debtor retains equity even if unsecured creditors are not paid in full.
Key advantage: Small business owners keep ownership without paying unsecured creditors in full.
1191(b) -- Cramdown
If impaired classes reject, the court confirms if the plan commits all projected disposable income for 3-5 years and does not discriminate unfairly.
Detailed cramdown guide at section1192.org →
Discharge timing: 1191(a): discharge upon confirmation. 1191(b): discharge after all payments completed.
Who Qualifies?
- Aggregate noncontingent liquidated debts not exceeding $7,500,000
- At least 50% from commercial or business activities
- Must be engaged in commercial or business activities
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Related Resources
section1192.org -- Subchapter V cramdown
1328f.org -- Bankruptcy research platform
howtofilebankruptcy.org -- Step-by-step filing guide