Chapter 11 Plan for a Small Business: 6 Classes of Creditors and How Each Votes

Who Votes Depends on Who Is Impaired

In a chapter 11, your debts are sorted into classes, and only the classes of creditors that you don’t pay in full get to vote. Expect up to six:

• secured lenders,
• priority tax claims,
• other priority unsecured,
• general unsecured,
• small-claim convenience class,
• and owners.

If a creditor class accepts the plan, it only has to have two-thirds of the dollars represented by the voting, but the voting has to include over half of the creditors who are voting. For owners, it’s a two-thirds majority measured by dollars only.

Classes must be made up of substantially similar claims, whether they are secured or unsecured. An impaired class means that the claims of the debt are not paid in full and on time; they don’t get what they bargained for. If the plan promises that a creditor will be paid in full, the court assumes that creditor will vote in favor of the plan, and it won’t have to receive a ballot. If creditors get nothing, they can’t vote either but they get to be counted as rejecting the plan.

Secured creditors usually get their own class; they vote only if the plan changes their loan terms.

Tax claims get priority treatment in a Chapter 11 plan. These tax claims must be paid in full. You can do it in regular cash payments stretching as far as five years after the bankruptcy petition was filed.

Other priority unsecured claims usually get a separate class in the plan. They can’t vote unless the plan impairs them.

General unsecured creditors vote if their claims are impaired. And these creditors have to be given a reason to vote for the plan.

A small-claim convenience class may be created for little unsecured claims, or bigger ones reduced to a set amount. The judge approves the cutoff as reasonable and needed for administrative convenience.

Owners (shareholders or LLC members) are another class. Owners who have claims as owners and who aren’t getting anything under the plan are counted as a no vote but don’t receive ballots.

Even if some creditors vote against the reorganization plan, they still must be made as whole as they would if the business just sold off its assets in Chapter 7.

Subchapter V

To qualify for Subchapter V, the small business must have total debts of $3,424,000 or less, and at least half the debts have to be from your business. Congress passed legislation in September 2026 that raises the small business debt limit to $7.5 million, but that legislation is not yet law.

In ordinary Chapter 11 cases, at least one impaired class must accept the reorganization plan before a court can approve it. But votes by insiders don’t count for this purpose. In the Subchapter V case, if no class accepts, the court can still confirm at your request so long as you can show that no unfair discrimination is taking place. The plan also has to be found fair and equitable to your creditors. To be fair and equitable, all “disposable income” must be paid into the plan for at least three years, up to five years if the court directs it.

Subchapter V cramdown comes with a price. With cramdown, your discharge is delayed, the trustee makes plan payments, it’s hard to modify the plan, and trustee’s fees keep running after confirmation.

A Class That Returns No Ballots

If the creditor class doesn’t vote, what then? Some courts think that a silent class simply isn’t counted. But judicial decisions in a number of other courts around the country say that a class that returns no ballots is counted as rejecting the plan. In their view, a class must actually vote in favor of the plan in order for their debt to be treated as consensual.

The trustee won’t file a reorganization plan, only you can do it. It’s due no more than 90 days after you filed the bankruptcy petition. Under special circumstances, the judge may extend the deadline. When you file it, treat each class so that it has a reason to vote yes, and chase down every ballot so that no impaired class is silent.