Houston small business owners facing financial distress have more options than ever. From Subchapter V reorganization to Chapter 7 liquidation, here is how to choose.
Yes. Options include Chapter 7 (liquidation), Chapter 13 (sole proprietors, debt under $2.75M), or Subchapter V (businesses with debt under $7.5M). The best option depends on your structure and goals.
| Option | Best For | Keep Operating? | Filing Fee |
|---|---|---|---|
| Chapter 7 | Businesses that should close | No | $338 |
| Chapter 13 | Sole proprietors (debt under $2.75M) | Yes | $313 |
| Subchapter V | Businesses with debt under $7.5M | Yes | $1,738 |
| Chapter 11 | Larger businesses | Yes | $1,738 |
Subchapter V of Chapter 11 was created in 2019 specifically for small businesses:
Texas has no state income tax, which reduces the financial burden on small business owners in bankruptcy. Houston's oil-and-gas, construction, and service industries produce significant Chapter 11 Subchapter V filings. The S.D. Tex. is one of the busiest bankruptcy districts in the country.
Many Houston owners sign personal guarantees on leases, credit lines, and SBA loans. When the business fails, these make you personally liable.
Texas's exemptions (Unlimited (10 acres urban) homestead, Fully exempt if needed for work vehicle) protect your personal assets, and the remaining guaranteed debt can be discharged.
Yes. Options include Chapter 7 (liquidation), Chapter 13 (sole proprietors, debt under $2.75M), or Subchapter V (businesses with debt under $7.5M). The best option depends on your structure and goals.
A streamlined Chapter 11 for businesses with debts under $7.5 million. No creditor committee, owner retains equity, plan due within 90 days, dedicated trustee facilitates the process.
In Chapter 13 and Subchapter V, yes. You continue operating while repaying through a plan. Chapter 7 typically means liquidation.
Personally guaranteed business debts must be addressed in your individual bankruptcy. Texas exemptions protect your personal assets.
Not necessarily. Consult an attorney. If the LLC has debts you guaranteed, those transfer to your personal case.
Chapter 7: $338. Chapter 11/Subchapter V: $1,738. Subchapter V is much less expensive overall than traditional Chapter 11.
Use the free 1328(f) screener to check whether a prior discharge affects your eligibility for a new bankruptcy discharge.
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