Small Business Bankruptcy in New York

Q: What is Subchapter V bankruptcy?

Subchapter V is a streamlined version of Chapter 11 created by the Small Business Reorganization Act of 2019. It is available to businesses (and individuals with business debts) with total noncontingent, liquidated debts under $7.5 million. It is faster, cheaper, and simpler than traditional Chapter 11 - no creditors committee, no disclosure statement, and the debtor keeps ownership without creditor consent.

Q: Can I keep my business open during bankruptcy?

In Chapter 11 and Subchapter V, yes. The business continues operating as a debtor-in-possession while reorganizing its debts. In Chapter 7, the business typically closes and its assets are liquidated to pay creditors. The automatic stay protects the business from creditor actions during the case.

Q: How much does small business bankruptcy cost in New York?

Chapter 7 business filing fee is $338. Chapter 11 filing fee is $1,738 (reduced to $571 for Subchapter V). Attorney fees for Chapter 11 in New York typically range from $15,000 to $50,000+ depending on complexity. Subchapter V cases generally cost less because of the streamlined process.

New York small businesses have several bankruptcy options depending on whether the goal is to close the business or reorganize and continue operating. Subchapter V has made reorganization faster and more affordable.

Small businesses in New York can file Chapter 7 (liquidation to close the business), Chapter 11 (reorganization to continue operating), or Subchapter V of Chapter 11 (streamlined reorganization for businesses with under $7.5 million in noncontingent, liquidated debt). Sole proprietors may also consider Chapter 13 for businesses with personal liability.

Bankruptcy Options for Small Businesses

Option	Purpose	Debt Limit	Filing Fee
Chapter 7	Liquidate and close	No limit	$338
Chapter 11	Reorganize	No limit	$1,738
Subchapter V	Streamlined reorganization	$7.5 million	$571
Chapter 13 (sole proprietors)	Personal + business debts	No limit (post-2024)	$313

Subchapter V - Small Business Reorganization

Subchapter V of Chapter 11, created by the Small Business Reorganization Act of 2019, is specifically designed for small businesses:

Debt limit: Total noncontingent, liquidated debts under $7.5 million (at least 50% from business activity)
No creditors committee: Reduces cost and complexity
No disclosure statement: The plan goes directly to the court for confirmation
Debtor keeps ownership: No requirement for creditor consent to confirm the plan (cramdown available without the absolute priority rule)
Dedicated Sub V trustee: Facilitates the process (but does not take control of the business)
90-day plan deadline: The plan must be filed within 90 days of the petition date
3-5 year plan: Disposable income is paid to creditors over 3-5 years

Chapter 7 Business Liquidation

If the business cannot be saved, Chapter 7 liquidation provides an orderly wind-down:

A trustee takes control of business assets and sells them to pay creditors
The business ceases operations
For sole proprietors, personal liability for business debts can be discharged
LLCs and corporations do not receive a discharge - they simply cease to exist
Personal guarantees on business debts may need to be addressed in a separate personal filing

Sole Proprietors: Personal and Business Debts

If you operate as a sole proprietor (no LLC or corporate structure), your personal and business debts are intertwined. Options include:

Chapter 7: Eliminates personal liability for business debts. The business closes, but you get a fresh start.
Chapter 13: Keep operating your business while repaying debts over 3-5 years. Good for sole proprietors who want to continue the business.
Subchapter V: Available to individuals with business debts comprising at least 50% of total debt.

New York exemptions protect tools of trade up to $3,000, which can include business equipment for sole proprietors.

S.D.N.Y. Business Bankruptcy Courthouses

Manhattan: One Bowling Green, New York, NY 10004
White Plains: 300 Quarropas St, White Plains, NY 10601

The Southern District of New York handles some of the most complex business bankruptcies in the nation. For small business cases, Subchapter V has significantly reduced the cost and time required. Look up your district.

Frequently Asked Questions

What are the bankruptcy options for small businesses in New York?

Chapter 7 (liquidation to close), Chapter 11 (reorganization), Subchapter V (streamlined reorganization for debts under $7.5M), and Chapter 13 for sole proprietors. The best option depends on whether you want to continue operating.

What is Subchapter V bankruptcy?

A streamlined Chapter 11 for businesses with under $7.5M in debt. No creditors committee, no disclosure statement, the debtor keeps ownership, and the plan must be filed within 90 days. It is faster and cheaper than traditional Chapter 11.

Can I keep my business open during bankruptcy?

Yes, in Chapter 11 and Subchapter V. The business operates as a debtor-in-possession while reorganizing. In Chapter 7, the business typically closes. The automatic stay protects the business during the case.

How much does small business bankruptcy cost?

Filing fees: Chapter 7 ($338), Chapter 11 ($1,738), Subchapter V ($571). Attorney fees for Chapter 11 in New York typically range from $15,000-$50,000+. Subchapter V cases generally cost less. Cost breakdown.