Subchapter V Debt Limit in 2026: Is Your Business Eligible to File?

Subchapter V of the U.S. Bankruptcy Code allows qualifying small businesses to reorganize their debts without going through the full Chapter 11 reorganization process. The Subchapter V “small business bankruptcy” process significantly reduces time and costs, as it eliminates many of the more burdensome requirements that apply in traditional Chapter 11 cases. Learn more from an experienced Miami business bankruptcy attorney at Edelboim Lieberman.

The Definition of a “Small Business” Under Subchapter V

Filing under Subchapter V is exclusively an option for “small businesses,” or, more specifically, “small business debtors.” This term is defined in Section 101(51D) of Chapter 11:

“The term ‘small business debtor’. . . means a person engaged in commercial or business activities . . . that has aggregate noncontingent liquidated secured and unsecured debts as of the date of the filing of the petition or the date of the order for relief in an amount not more than $2,000,000 (excluding debts owed to one or more affiliates or insiders) not less than 50 percent of which arose from the commercial or business activities of the debtor . . . .”

Thus, the debt threshold in Section 101(51D) is the key factor for determining whether a business is eligible to file under Subchapter V. While the debt threshold was originally set at $2,000,000, it is adjusted annually for inflation.

As of January 1, 2026, the Subchapter V debt limit was $3,424,000.

However, this could change later in the year. Annual inflation adjustments are typically made on April 1, and Congress is considering enacting an amendment that would immediately increase the Subchapter V debt limit to $7.5 million. The debt limit was temporarily increased to $7.5 million during the COVID-19 pandemic, and broad support has caused Congress to consider reinstating this enhanced debt limit on a permanent basis.

While the vast majority of businesses that have less than $3,424,000 in aggregate noncontingent liquidated secured and unsecured debts will qualify to file under Subchapter V (assuming they meet the other requirements to pursue a business bankruptcy under Chapter 11), there are exceptions. Specifically, the definition of “small business debtors” under Subchapter V excludes:

• Any member of a group of affiliated businesses that has aggregate noncontingent liquidated secured and unsecured debts in an amount greater than $3,424,000 (excluding debt owed to one or more affiliates or insiders); and,
• Any corporation that is subject to the reporting requirements of Section 13 or Section 15(d) of the Securities Exchange Act of 1934, and any affiliates of these entities.

Calculating a business’s noncontingent liquidated debts can be more challenging in some cases than others. For business owners and executives contemplating reorganization and with questions about their business’s eligibility to file under Subchapter V, an experienced Miami business bankruptcy attorney can assist with assessing eligibility and considering any available alternatives.

Additional Considerations for Business Owners and Executives Contemplating Reorganization Under Subchapter V

While determining whether a business meets the definition of a “small business debtor” is a threshold issue for considering reorganization under Subchapter V, there are several other issues that business owners and executives will want to consider as well. Some examples of these additional considerations include:

Is the Business Prepared to Propose a Reorganization Plan?

When filing under Subchapter V, businesses have the opportunity (and the obligation) to propose a reorganization plan. While businesses do not need to file a proposed reorganization plan with their bankruptcy petition, they must file their proposed plan within 90 days of their initial filing.

With this in mind, as a practical matter, businesses will generally want to ensure they are prepared to propose a reorganization plan before filing. At a minimum, business owners and executives should be confident that they can meet the 90-day deadline before initiating the process. Likewise, if it makes sense to file immediately without a reorganization plan (i.e., to benefit from the automatic stay on collection), business owners and executives should be prepared to prioritize working with their company’s bankruptcy counsel to meet the 90-day deadline.  

Is the Business’ Reorganization Plan “Feasible?”

When proposing a reorganization plan in a Subchapter V bankruptcy, it is not enough to simply propose “something” to meet the 90-day filing requirement. The bankruptcy code requires that all proposed reorganization plans be “feasible.” This means that adhering to the plan, “is not likely to be followed by the liquidation, or the need for further financial reorganization, of the debtor or any successor to the debtor under the plan, unless such liquidation or reorganization is proposed in the plan.”

What is “feasible” for any individual business depends on that business’s specific financial and commercial circumstances. Here too, to ensure compliance with the U.S. Bankruptcy Code, business owners and executives should be prepared to work closely with their company’s bankruptcy counsel.

Will Reorganizing Allow the Business to Achieve Its Financial Goals?

Another key consideration is whether reorganizing the business’s debts under Subchapter V will allow the business to achieve its long-term financial goals. While reorganizing under Subchapter V is a viable solution for many financially distressed businesses, it is not a viable solution in all scenarios.

If filing under Subchapter V will not serve its intended purpose, there are other—and almost certainly better—options available. An experienced Miami business bankruptcy attorney can assist with evaluating these options, including non-bankruptcy alternatives.

Schedule a Free Consultation with a Miami Business Bankruptcy Attorney at Edelboim Lieberman

Do you have questions about reorganizing your business’s debts under Subchapter V in 2026? If so, we invite you to get in touch. We work with financially distressed businesses throughout South Florida, and our attorneys have extensive experience advising business owners and executives regarding their bankruptcy and non-bankruptcy options. To schedule a free consultation with a Miami business bankruptcy attorney at Edelboim Liberman, call us at 305-768-9909 or contact us online today.