Massachusetts Subchapter V Bankruptcy: A Guide for Business Owners
For many small business owners in Massachusetts, winter can feel like the toughest season of the year. Sales may slow, expenses pile up, and year-end debt obligations loom large. If your business is struggling to stay afloat, Subchapter V bankruptcy may be an option worth considering.
Subchapter V, a streamlined version of Chapter 11 bankruptcy, was designed to help small businesses restructure debt, maintain operations, and move forward without shutting their doors. Here’s what you need to know.
What Is Subchapter V and Who Qualifies?
Subchapter V is a part of Chapter 11 bankruptcy, but it’s specifically tailored for small businesses. To qualify:
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Your business must have less than $3,424,000 in debt (as of April 1, 2025).
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The majority of your debt must come from business activities.
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You must be engaged in commercial or business operations.
Unlike traditional Chapter 11, Subchapter V is faster, less expensive, and gives owners more control in the process.
Key Differences from Regular Chapter 11 include: less complexity, lower filing and overhead costs, debtor control and the filing of reorganisation plans by only the debtor.
Process & Timeline
Here’s a general roadmap for Subchapter V in Massachusetts:
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Filing: You file a petition with the bankruptcy court.
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Trustee Appointment: A Subchapter V trustee is appointed to oversee the case.
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Plan Preparation: Within 90 days, you must submit a plan for restructuring debt.
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Confirmation: The court reviews and approves the plan if it’s fair and feasible.
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Discharge: Once obligations under the plan are completed, remaining debts may be discharged.
Benefits of Subchapter V for Massachusetts Businesses are: keeping your business running while reorganizing debt; protecting jobs and assets; the latitude to negotiate more flexible repayment terms with creditors and avoidance of the stigma and shutdown that often come with liquidation.
Potential Risks of Subchapter V include:
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Your credit and ability to borrow may be affected.
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You must strictly comply with repayment obligations.
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If your business can’t meet the plan, the case may be dismissed or converted to Chapter 7.
At Ravosa Law Offices, P.C., we’ve helped business owners across Massachusetts weigh their options and build strategies that protect their livelihoods. We understand the local courts, the challenges of small business ownership, and how to tailor a bankruptcy strategy that supports your long-term success.
If your business is facing mounting debt this winter, don’t wait until it’s too late. Subchapter V bankruptcy may provide the path to restructuring and recovery.