Lone Star Counsel \u2014 Attorneys & Advisors
Restructuring · Chapter 11 · Subchapter V
Attorney. CPA. Business Advisor.
For closely-held Texas business

Subchapter V Bankruptcy Counsel
for Texas Businesses.

When business debt threatens operations, an informed assessment can help identify the available options. Darryl V. Pratt, Esq., CPA helps Texas business owners evaluate Subchapter V eligibility and restructuring considerations in light of their business and financial circumstances — debt structure, cash flow, secured creditors, leases, taxes, guaranties, operations, and a realistic plan for continued business. Call (972) 712-1515 to request a business restructuring assessment.

Discuss a possible Subchapter V matter (972) 712-1515
Signed by the PartnerBy Darryl V. PrattManaging Partner
8 min read
Reviewed February 2026
Bankruptcy & Restructuring
01

Speed

Most plans are filed within 90 days of the petition, and confirmation frequently follows within 60 to 90 days after that. Traditional Chapter 11 commonly runs 12–18 months.

02

Cost

No creditors' committee. Fewer contested motions. Total professional fees are typically a fraction of a classic Chapter 11.

03

Control

The debtor generally remains in possession. The modified absolute-priority rule may permit the equity holder to retain the business if the plan meets the fair-and-equitable standard.

04

Trustee as facilitator

A Subchapter V Trustee is appointed to facilitate consensual reorganization — not to displace management.

When this is the right tool

When Subchapter V is the right tool

  • Your business is fundamentally viable — the cash-flow problem is one specific liability, not a broken operating model.
  • Your aggregate non-contingent liquidated debt is under the current Subchapter V eligibility cap (approximately $3.4 million as of 2026, subject to inflation adjustments and periodic Congressional revision).
  • You want to remain in business and retain ownership.
  • You have the runway to fund a 3-to-5-year plan from disposable income or restructured debt service.
  • You have already exhausted — or seriously considered — workout and out-of-court restructuring options.
When it is not

When Subchapter V is not the right tool

  • The business is not viable on any reasonable forward forecast — Chapter 7 may be the more disciplined path.
  • Aggregate debt exceeds the Subchapter V cap — traditional Chapter 11 or an out-of-court restructuring is required.
  • The problem can be solved with a creditor workout — file as a last resort, not a first.
Direct answer

When a Business Should Evaluate Restructuring.

Restructuring options are widest, cheapest, and most effective before creditor actions, judgments, or lender defaults foreclose them. A timely assessment is not a commitment to file — it is a commitment to understand the choices while they still exist. Common signals that an evaluation is appropriate:

  • Cash-flow shortfall that cannot be closed by ordinary trade credit or an operating adjustment.
  • Secured-lender default notice, cure demand, notice of acceleration, or foreclosure warning.
  • Missed tax deposits (Form 941 payroll, franchise, sales-and-use), or a state or federal tax lien.
  • Judgment, garnishment, or pending litigation that could impair operations or asset title.
  • Landlord default, lease-termination notice, or an eviction proceeding at a critical location.
  • Personal-guaranty demand from a lender, landlord, or trade creditor.
  • Loss of a key customer, contract, license, or a concentrated supplier relationship.
  • Owner is considering closure, a sale, an out-of-court workout, or has been advised of personal-bankruptcy exposure.
How the engagement begins

Initial Advance Deposit for a Subchapter V Assessment.

Initial engagement
$5,000 initial assessment engagement

The engagement begins with an initial $5,000 assessment covering Subchapter V eligibility, due diligence, and restructuring evaluation. This is an evaluation — not a filing.

The assessment is subject to a written engagement agreement and to the applicable legal-review, conflict-of-interest, and client-admission requirements of the firm. It does not guarantee that a Subchapter V case will be filed, that the business will qualify under current federal statute, or that any particular outcome will be achieved.

Its purpose is to give the owner a rigorous, fact-based picture of the choices — bankruptcy and non-bankruptcy — while there is still time to make them.

Scope of the assessment

What the Assessment Evaluates.

Every assessment is scoped to the specific business and coordinated with the client's CPA, financial advisor, lender counsel, and other professionals as appropriate.

  • Eligibility

    Statutory debt-cap analysis, entity-type analysis, and the primary-business-activity test under current federal statute and Fifth Circuit precedent.

  • Debt and creditor structure

    Secured, unsecured, priority, contingent, and disputed claims. Loan agreements, intercreditor documents, and any pre-petition workout activity.

  • Cash flow

    Historical performance and a rolling 12- to 13-week forward projection sufficient to test plan feasibility and cash-collateral posture.

  • Secured debt

    Loan documents, collateral schedules, UCC filings, personal-property and real-property liens, cure analysis, and modification posture.

  • Leases and executory contracts

    Landlord and vendor defaults, cure amounts, assume/assume-and-assign/reject analysis, and critical-vendor exposure.

  • Taxes

    Form 941 trust-fund exposure, sales-and-use, franchise, priority-tax analysis, and interaction with any state or federal tax lien.

  • Personal guaranties

    Scope, triggering events, waiver language, cross-collateralization, and negotiation posture as part of a coordinated resolution.

  • Operational viability

    A realistic forward operating plan, management continuity, and the practical ability to fund a 3- to 5-year plan from disposable income or restructured debt service.

  • Restructuring alternatives

    Subchapter V, traditional Chapter 11, out-of-court workout, sale, or orderly wind-down — evaluated on their own merits, not as a foregone conclusion.

The Decision Matrix

Subchapter V vs. the alternatives

Dimension
Subchapter V
This page
Classic Chapter 11
Chapter 7 (Business)
Out-of-Court Workout
Typical timeline~90 days to confirmation12–18+ months60–120 days to discharge30–90 days
Total professional costModerateHighModerateLow
Owner keeps the business?Yes — typicallySometimes (subject to absolute priority)No — business is liquidatedYes
Creditors' committee?NoYesN/ANo
Public filing?YesYesYesNo
Debt cap?~$3.4M (current)NoneNoneNone
Best when…Business is viable but over-leveredLarge, complex, multi-creditorBusiness has no forward pathCreditors will negotiate voluntarily
The Process

The process — what 90 days actually looks like

I

Pre-filing strategy

Eligibility analysis, cash-flow projections, plan-feasibility modeling, creditor mapping. Most of the work that determines outcome happens here.

II

Petition & first-day motions

Voluntary petition filed. First-day orders to maintain operations, payroll, and cash collateral usage.

III

Status conference & trustee appointment

Court holds a Subchapter V status conference within 60 days. Subchapter V Trustee is appointed as facilitator.

IV

Plan filing

Debtor files the plan within 90 days of the petition. Plan is the operating blueprint for 3–5 years.

V

Confirmation

Court confirms the plan — consensually if creditors agree, or by cramdown if the fair-and-equitable standard is met. Confirmation is the inflection point.

VI

Plan performance

Debtor performs under the plan. Most matters discharge upon completion (3–5 years).

Common Questions

Frequently
asked.

Direct answers to the questions we are asked most often about this matter.

All firm FAQs
01What is Subchapter V?+
Subchapter V is a small-business track within Chapter 11 of the United States Bankruptcy Code, added by the Small Business Reorganization Act of 2019. It is designed for closely held businesses whose reorganization would be uneconomic under traditional Chapter 11. A Subchapter V case is administered by a trustee whose statutory role is to facilitate consensual reorganization; the existing owner-management typically remains in possession and continues to operate the business through confirmation of a plan.
02Which Texas businesses may qualify?+
Eligibility is determined by federal law and depends on multiple factors, including the aggregate amount of non-contingent liquidated debt as of the petition date, whether the debtor is primarily engaged in commercial or business activities, and whether the debtor and its affiliates satisfy the statutory conditions. The current debt cap is approximately $3.4 million (as of 2026, subject to inflation adjustment and periodic Congressional revision). Eligibility is fact-specific and must be evaluated case-by-case against current statute and Fifth Circuit precedent. This page does not determine eligibility.
03How is Subchapter V different from a traditional Chapter 11?+
Compared to a traditional Chapter 11, a Subchapter V case typically involves a shorter timeline (plan filing within 90 days of the petition), no unsecured creditors' committee, no U.S. Trustee quarterly fees, and a modified absolute-priority rule that may permit an equity holder to retain ownership if the plan meets the fair-and-equitable standard. Total professional fees are generally substantially lower. The trade-offs are the debt cap and the tighter statutory timelines.
04Can a business continue operating?+
In most cases, yes. The debtor generally remains in possession of the assets and continues to operate the business during the case. Continuation of ordinary-course operations, payroll, and vendor relationships is a core objective of the process — subject to Bankruptcy Code requirements for the use of cash collateral, post-petition financing, and court approval of transactions outside the ordinary course.
05What happens to secured debt, leases, and tax obligations?+
Secured debt is generally reorganized according to the plan, which may modify payment terms, interest rates, and amortization within statutory limits (with specific restrictions on residential-mortgage cramdown). Executory contracts and unexpired leases are assumed, assumed-and-assigned, or rejected under statutory rules, subject to cure requirements. Priority taxes and administrative claims must generally be paid in full through the plan on defined timelines. Every situation depends on the specific creditor rights, contract terms, and applicable law involved.
06How do personal guaranties affect the analysis?+
Owners of closely held businesses frequently sign personal guaranties. A Subchapter V case reorganizes the business's debt; it does not, on its own, discharge the guarantor's personal liability. Coordinated planning may involve negotiated releases, plan-based settlements with guaranteed creditors, or — in appropriate circumstances — a separate personal bankruptcy or a non-bankruptcy resolution for the guarantor. Guaranty exposure is one of the most consequential inputs into the restructuring analysis and is evaluated at the outset.
07How long can a case take?+
A Subchapter V plan must generally be filed within 90 days of the petition, and confirmation frequently occurs within 60 to 90 days after that. Plan performance typically extends over 3 to 5 years. Case timelines depend on the complexity of the debtor, the number and posture of creditors, and any objections filed. Some cases confirm faster; others take longer. No timeline is guaranteed.
08When should a business owner seek counsel?+
As early as possible. Restructuring options are widest, cheapest, and most effective before creditor actions, judgments, or lender defaults foreclose them. A timely eligibility, due-diligence, and restructuring assessment often preserves both bankruptcy and non-bankruptcy options that a later engagement can no longer reach. Counsel is not a commitment to file — it is a commitment to evaluate the choices while options remain.
09What is the current Subchapter V debt cap?+
The Subchapter V eligibility cap is the maximum aggregate non-contingent liquidated debt a debtor may carry to qualify. The temporary $7.5 million cap created by the CARES Act and subsequent extensions expired in June 2024, returning the cap to the statutory baseline — approximately $3.4 million as of 2026, subject to inflation adjustments and periodic Congressional revision. Lone Star Counsel verifies eligibility against the cap in force on the date of filing as the first item of any Subchapter V engagement.
10How long does a Subchapter V case typically take?+
By statute, the debtor must file the plan within 90 days of the petition. Most Subchapter V cases reach confirmation within four to six months of filing — a fraction of the 12-to-18-month timeline that traditional Chapter 11 ordinarily requires. Plan performance then runs three to five years, after which most matters discharge.
11Is Subchapter V right for my Texas medical or professional practice?+
Often, yes. Closely-held physician, dental, veterinary, and other professional practices frequently sit squarely within the Subchapter V profile — viable operating model, manageable debt, owner who wants to keep practicing. The combination of attorney-and-CPA counsel matters more here than in most engagements: practice receivables, payor-mix projections, and the interaction of professional-entity rules with bankruptcy treatment all require both lenses. We handle these matters routinely from our Frisco, Sugar Land, and The Woodlands offices.
12Do I need a CPA and a bankruptcy lawyer — or can one firm do both?+
Most clients facing meaningful restructuring need both disciplines: a bankruptcy attorney to handle the legal process, and a CPA to handle the tax treatment of debt forgiveness, the means test, plan feasibility projections, and post-confirmation reporting. Lone Star Counsel is one of the few Texas firms whose principal — Darryl V. Pratt — is dually licensed as a Texas attorney and a Certified Public Accountant. One firm, both credentials, no hand-offs, no cross-charging, and a single coherent strategy from intake through discharge.
Related counsel

Coordinate the resolution with the surrounding plan.

Chapter 11 Reorganization

The traditional Chapter 11 path — for debtors exceeding the Subchapter V debt cap or requiring the full toolbox.

Chapter 7 (Business)

When the business is not viable on any reasonable forward forecast and an orderly liquidation is the disciplined path.

Business Succession

Coordinating restructuring with a longer-arc succession or sale plan when the business is viable but the owner is exiting.

Asset Purchase Agreement

Where the resolution ends in a sale of the operating business rather than a reorganization.

Related Restructuring Counsel

The other paths
we counsel on.

Restructuring · Chapter 11 · Reorganization
Chapter 11
The considered reorganization for the business that has outgrown the shortcuts.
Read
Restructuring · Chapter 7 · Business
Chapter 7 — Business
When the right answer is to close cleanly.
Read
Restructuring · Chapter 7 · Individual
Chapter 7 — Individual
A fresh start, with an attorney and a CPA under one roof.
Read
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This page is general information about Texas restructuring counsel and does not constitute legal advice. Bankruptcy is a fact-specific matter; the right path depends on circumstances we cannot evaluate from a public webpage. Begin with a private conference.