Chapter 11 Subchapter V Bankruptcy for Small Businesses in Texas

If you own a small business in Texas, bankruptcy might not be your first choice when your bills are past due, your line of credit is coming due, and your vendors want payment. However, Subchapter V bankruptcy could be an effective way for your company to survive in many parts of Texas, including Dallas-Fort Worth, Houston, Austin and San Antonio. U.S. business bankruptcies increased more than 12% from January through April 2026, and Subchapter V bankruptcies surged almost 50%. Many Texas businesses are now looking into this form of bankruptcy as a reorganization option.

What Is Subchapter V Bankruptcy?

Subchapter V bankruptcy is a version of Chapter 11 created in 2019 by the Small Business Reorganization Act. Congress extended and expanded Subchapter V in 2024. Subchapter V is intended for small businesses that need the protection of Chapter 11 bankruptcy but cannot afford or manage the cost, complexity, and length of a traditional Chapter 11 bankruptcy.

Generally, there is no creditors’ committee to slow down proceedings or increase costs. The debtor retains possession and control of its property, and a Subchapter V trustee will assist in the development of a plan of reorganization but will not take possession of the debtor’s property or manage its business affairs. The absolute priority rule does not apply, which means a debtor’s owner(s) do not have to pay off all unsecured creditors in full in order to retain their ownership interest.

In effect, Texas business debtors have a faster and less expensive Chapter 11 bankruptcy that allows them to keep control of their business during the process.

Who Can File Subchapter V Bankruptcy?

The most important requirement is the amount of debt a business has. In 2025, the maximum non-contingent, liquidated debt is $7.5 million, half of which must be from commercial or business activities.

However, debt calculations can be tricky because contingent and disputed claims, guarantees, claims arising out of litigation, and accounts payable may affect eligibility. An accurate evaluation of your total debt helps ensure that you qualify for Subchapter V.

The attorneys at Tittle Advisory Group can quickly assess your finances with your legal counsel and other advisors to determine your eligibility for Subchapter V.

How Subchapter V Bankruptcy Differs from Chapter 11

Both Subchapter V bankruptcy and regular Chapter 11 bankruptcy fall under Chapter 11 of the Bankruptcy Code, but they differ in several ways.

Cost and complexity: Traditional Chapter 11 bankruptcy involves U.S. Trustee fees, a creditors’ committee and their advisors, multiple reports and documents, and more extensive negotiations with creditors. Subchapter V avoids the costs of a creditors’ committee, limits U.S. Trustee involvement and shortens the plan confirmation process.

Plan timeline: The debtor must generally file its plan within 90 days after the petition date. While traditional Chapter 11 cases can take 12 to 24 months or longer to resolve, the compressed Subchapter V timeline puts a premium on pre-filing preparation. The key differences include: Discharge of debts: Traditional Chapter 11’s absolute priority rule generally requires that unsecured creditors be paid in full before equity holders retain their ownership. However, Subchapter V eliminates this requirement if the plan commits all projected disposable income for three to five years to unsecured claims. Only individuals — not entities — receive a discharge: A Subchapter V discharge is only available to individual debtors. While entity debtors get a structured repayment framework and automatic-stay protection, they do not receive a discharge at plan completion.

Preparing for a Subchapter V Filing: What Texas Business Owners Should Do Now

Waiting too long to file is one of the biggest mistakes companies make. Before you file for bankruptcy, you need to understand your company’s financial position, have a preliminary idea of a plan framework, and be prepared to manage cash under the supervision of the Court.

1. Conduct a rapid financial assessment. Assess your company’s cash, accounts receivable aging, fixed obligations, secured debt, unsecured trade debt, and contingent liabilities. These factors determine Subchapter V eligibility, help identify creditor leverage, and inform the repayment plan.
2. Build a 13-week cash flow projection. A credible forecast shows that the company can continue to operate during the case and provides a foundation for plan feasibility.
3. Engage stakeholders early. Engage secured lenders, critical vendors, and landlords before the filing to reduce friction and signal good faith.
4. Assemble the right advisory team. Your legal counsel will handle the filing and process with the Court, but a restructuring advisor is essential for financial assessment, cash flow modeling, feasibility analysis, and operational oversight. Tittle Advisory Group provides principal-led financial leadership, with John Tittle, Jr. personally directing engagements.

Common Pitfalls in Subchapter V Cases

Underestimating disposable income: The plan must commit projected disposable income to unsecured creditors. If the company outperforms projections, creditors may request additional payments, making defensible forecasts crucial.

Failing to address secured debt: Secured claims must still be addressed through payments, cramdown, or negotiated terms. A distressed business valuation may be necessary to determine the value of the collateral.

Operating without financial discipline: Failing to keep accurate books and records, manage cash, or file required reports can result in dismissal or conversion to Chapter 7. Consider bringing in an interim CFO or financial advisor to strengthen operational governance.

Ignoring tax obligations: Taxes incurred post-petition are treated as administrative expenses, while pre-petition tax liabilities are priority claims. Tittle Advisory Group is not a CPA firm and cannot provide tax compliance services; coordination with a tax professional is recommended for those matters.

The Strategic Advantage of Principal-Led Advisory in Subchapter V

Subchapter V moves fast. Access to seasoned financial expertise early is critical. Issues such as cash management, vendor relations, plan terms, and stakeholder communications all demand seasoned judgment.

John Tittle, Jr. is a former Deloitte Partner, public-company CFO, and licensed CPA/CFF/CGMA, with additional designations of CTP, CIRA, and CDBV. Since 1983, he has provided expert testimony more than 100 times. Every aspect of his financial analysis has been subjected to judicial scrutiny.

Under this principal-led model, the same individual analyzes the company’s financial statements, creates the cash flow forecast, and provides guidance on the viability of the proposed plan. There is no “hand-off” to another party and no loss of subject matter expertise.

Frequently Asked Questions

How long will a Subchapter V case take in Texas?

The plan should generally be filed within 90 days, and a hearing on confirmation could occur anywhere from four to six months later. The timing will depend on the complexity of the case, any objections that are raised, and the local court schedule.

Can I continue to run my business during a Subchapter V case?

Yes. The debtor typically remains in possession and control of the company, and the Subchapter V trustee will work to facilitate the plan process.

What happens to my personal guarantees in a Subchapter V case?

The automatic stay protects the business entity itself. However, any personal guarantees that you signed are not automatically released. You should discuss your personal liability exposure with your attorney.

Is a business valuation necessary in a Subchapter V case?

It may be. In some cases, a valuation may be required to determine the status of secured claims, to assess whether the company is solvent, or to evaluate the feasibility of the proposed plan. John Tittle, Jr. is also certified as a Designated Valuation Expert (CDBV) and can assist with the valuation component of the case, if needed.

What’s the difference between a Subchapter V trustee and a traditional Chapter 11 trustee?

A Subchapter V trustee works to facilitate the plan process but does not assume operational control of the company. A traditional Chapter 11 trustee steps in to replace existing management. Tittle Advisory Group can also serve as a trustee, receiver, and CRO, as appropriate. When acting as a Subchapter V trustee, however, our role is to provide advice and assistance. We do not take on a fiduciary role.

Conclusion: Subchapter V as a Strategic Tool for Texas Business Survival

Subchapter V bankruptcy may not be the end. For small and mid-sized businesses in Texas, it can offer the time and legal protection necessary to restructure debt, stabilize operations, and develop a viable capital structure. Getting there requires careful planning, credible financial projections, effective communication with stakeholders, and experienced financial leadership.

With business bankruptcies on the rise in Texas, business owners and their legal teams need trusted advisors with deep knowledge of restructuring, working capital management, and navigating court-supervised proceedings. Tittle Advisory Group provides principal-led support backed by Big Four credentials, courtroom-tested credibility, and practical operating experience.

If your business is struggling and you want to know if Subchapter V might be the right path, you can begin preparing today. To schedule a confidential consultation with John Tittle, Jr., please visit tittlefinancial.com or call (214) 341-6043.