Debt Limit
Aggregate noncontingent, liquidated debts must not exceed $7.5 million (as extended by Congress). This includes both secured and unsecured debts. Contingent and unliquidated debts are excluded from the calculation.
Business Activity Requirement
At least 50% of debts must arise from the debtor's commercial or business activities. This excludes primarily consumer debtors. A sole proprietor with mostly business debts qualifies. A wage earner with mostly personal debts does not.
Exclusions
Single asset real estate debtors are excluded. Entities whose primary activity is the business of owning single asset real estate cannot use Subchapter V. Affiliates of publicly traded companies are also excluded.
Who Can File
Individuals, partnerships, LLCs, and corporations can all file under Subchapter V. The debtor elects Sub V at the time of filing by checking the appropriate box on the petition.
The 50% Business Debt Test
The 50% requirement is calculated based on noncontingent, liquidated debts as of the petition date. For a sole proprietor who operates a cleaning company, debts related to equipment leases, vendor accounts, and business credit cards count as business debts. A personal mortgage, medical bills, and personal credit card debt count as consumer debts. If the business debts are at least 50% of total qualifying debts, the sole proprietor can elect Subchapter V. Courts have taken a practical approach to this calculation, and debts that arise partly from business and partly from personal use are generally allocated based on their primary purpose.
When to Choose Subchapter V Over Chapter 13
Business owners with debts exceeding the Chapter 13 limit (currently $2,750,000 in secured and unsecured debts combined) may find Subchapter V to be their only reorganization option. Even below that threshold, Subchapter V offers advantages: no absolute priority rule (the debtor can retain equity without paying unsecured creditors in full), a dedicated Subchapter V trustee who acts as a facilitator rather than a liquidator, and no creditors' committee to negotiate with. The 90-day plan deadline also forces faster resolution than Chapter 13's often extended confirmation process.
Debt Limit History
The Small Business Reorganization Act of 2019 originally set the Subchapter V debt limit at $2,725,625. The CARES Act of 2020 temporarily raised it to $7.5 million to help businesses affected by the pandemic. Congress has extended this higher limit multiple times. As of 2024, the limit remains at $7.5 million. Any future changes to this threshold will affect who qualifies. For information on how Subchapter V plans are discharged, see the Section 1192 discharge guide.
Learn about Sub V discharge
Section 1192 Guide