Chapter 11 is the chapter a business uses when it intends to keep operating. The Bankruptcy Code calls it “reorganization.” Rather than closing and liquidating, the business restructures its debts under court supervision and continues trading while it does so. It is the most complex of the chapters, and it usually involves more assets and more interested parties than Chapter 7 or Chapter 13.
Corporate entities use it most, but not exclusively. An individual whose income is too high for Chapter 7 and whose debts exceed the Chapter 13 limits may find Chapter 11 is the remaining route.
Staying in control as debtor-in-possession
What defines Chapter 11 is that management usually stays in place. The business becomes a debtor-in-possession, running its own operations and controlling its own assets without a trustee taking over, and it picks up tools that do not exist outside bankruptcy.
New financing becomes possible on terms a struggling company could not otherwise get. A debtor-in-possession can offer new lenders priority ahead of existing creditors, sometimes called a “super priority” lien, which is what makes lending to a company in bankruptcy viable at all. Burdensome contracts can be rejected with court approval, including unexpired leases that no longer make commercial sense, and that is often the single largest source of savings in a reorganization. The automatic stay also halts collection, repossession and foreclosure activity while a plan gets developed.
Oversight is the trade-off. Major decisions need bankruptcy court approval, and creditors, shareholders and any official committee have standing to be heard on them. A Chapter 11 case is considerably more procedural, and more expensive, than the other chapters.
Subchapter V, the streamlined route for smaller businesses
Since the Small Business Reorganization Act took effect in 2020, a smaller business whose debts fall under a statutory ceiling may elect Subchapter V of Chapter 11. It was built to strip out what made conventional Chapter 11 impractical below a certain size. There is no creditors’ committee by default, no separate disclosure statement, only the debtor may propose a plan, and a plan can be confirmed without the consent of any class of creditors provided it commits the debtor’s projected disposable income for three to five years.
For most owner-operated Maryland businesses, Subchapter V rather than conventional Chapter 11 is now the realistic reorganization route, and whether you qualify is one of the first questions worth answering.
Eligibility turns on a debt ceiling, and that ceiling has moved twice in recent years. The $7.5 million limit introduced during the pandemic expired on June 21, 2024, and eligibility reverted to the original threshold as adjusted for inflation, which is $3,424,000 at present. The practical effect is stark. A Maryland business carrying $5 million in debt could elect Subchapter V in 2023, could not in 2025, and may be able to again before long.
Legislation to restore the higher limit permanently is moving through Congress. The Bankruptcy Threshold Adjustment Act of 2026 (S. 3977) passed the Senate unanimously on August 3, 2026 and would set the Subchapter V ceiling at $7.5 million on a permanent basis, ending the cycle of temporary increases and sunsets. It is not yet law. The bill awaits action in the House of Representatives, where companion legislation was reported out of the Judiciary Committee in March 2026. If your debts fall between the current ceiling and $7.5 million, discuss the timing of a filing now rather than after the fact. (Status as of August 2026.)
The plan, and how long it takes
To come out of Chapter 11 the debtor has to file a plan setting out how it will reorganize, or in some cases how it will liquidate in an orderly way over time, which is a legitimate use of the chapter rather than a failure of it. Creditors vote. The court reviews the plan against statutory requirements, and confirmation makes it binding.
Timelines vary widely. Conventional Chapter 11 cases commonly run from several months to two years, and there is no standard duration to rely on. Subchapter V is designed to move faster. The federal courts’ Chapter 11 overview is a useful primer.
Talk to a Maryland business bankruptcy attorney
Whether reorganization is viable, and whether Subchapter V is available to you, depends on your debt structure and how much of the business is worth preserving. Those questions are much cheaper to answer early. Call (410) 752-9300 or use the contact form on this page.