Subchapter V has been a heavily utilized vehicle for eligible small businesses seeking to reorganize or conduct an orderly liquidation. Subchapter V provides a more streamlined Chapter 11 process that offers largely the same benefits of a “traditional” Chapter 11 case while eliminating many of the risks and costs associated with Chapter 11—at least from the debtor’s perspective. The creditors of a Subchapter V debtor will need to grapple with most of the same issues they would face in a traditional Chapter 11 process, while also dealing with aspects of the process that are specific to Subchapter V, such as the absence of a creditors’ committee and the debtor’s ability to defer payment of administrative expense claims over the duration of its Subchapter V plan.
That said, creditors may have a significant collection tool in certain Subchapter V cases, in that they may be able to assert exceptions to discharge against corporate debtors that can only be asserted against individual debtors in traditional Chapter 11 cases. However, this collection tool is not available in all Subchapter V cases. As illustrated by a February 2025 opinion issued by a Georgia bankruptcy court, in Halo Human Resources v. American Dental, the exceptions to discharge do not apply to a corporate Subchapter V debtor that confirms a consensual plan—i.e., where all the debtor’s voting classes accepted the debtor’s Subchapter V plan.
Click here to view the full article