Subchapter V asset sales: selling data to fund a small business plan

Subchapter V of Chapter 11, added by the Small Business Reorganization Act of 2019, gives qualifying small businesses a faster, cheaper path to reorganize. It also compresses the calendar. If your plan depends on finding cash quickly, a sale or license of operational data is worth evaluating early.

General information, not legal advice. Eligibility and procedure depend on your facts and your court.

What's different about Subchapter V

• Eligibility. The debtor must be engaged in commercial or business activities and have total debts below a statutory limit, which has changed several times since 2019. Check the current figure with counsel.
• A Subchapter V trustee is appointed in every case (§ 1183). The trustee doesn't usually run the business; they monitor it, facilitate a consensual plan, and in many cases disburse plan payments.
• Speed. The debtor generally must file a plan within 90 days of the order for relief (§ 1189), unless the court extends it for circumstances the debtor isn't justly accountable for.
• No creditors' committee unless the court orders otherwise, and no U.S. Trustee quarterly fees.
• Owners can keep equity without satisfying the absolute priority rule if the plan commits projected disposable income for three to five years and meets the other § 1191 requirements.

Asset sales still go through Section 363

Subchapter V doesn't change how a sale outside the ordinary course works. A data license or sale still needs notice and a hearing under § 363(b), and the privacy limit in § 363(b)(1) still applies. What changes is the pace and the audience: there's usually no committee to persuade, but the Subchapter V trustee will want to understand the deal and how it fits the plan.

Read the mechanics in Section 363 sale of data assets.

How a data sale can help a Subchapter V plan

Plans in Subchapter V are often built on projected disposable income over three to five years. A one-time cash infusion can help in several ways:

• Bridging the case. Covering operating shortfalls during the first months, alongside or instead of DIP financing.
• Funding effective-date payments, such as administrative claims and the Subchapter V trustee's fees.
• Supporting feasibility. A plan that's easier to fund is easier to confirm.

Whether proceeds are available for these uses depends on liens and the court's orders. If a lender holds a lien on general intangibles, the lien likely attaches to the proceeds.

Is there enough data?

Small businesses sometimes assume they're too small to have anything of value. Often that's right, and we'll say so. But some small businesses hold exactly what AI developers look for:

• Several years of consistent records in a specialized trade (field service, dispatch, practice management, construction project files).
• Well-kept SOPs and training material.
• Long email histories showing how quotes, approvals and escalations work.

Headcount matters less than consistency and specialization.

Working with the Subchapter V trustee

Bring the trustee in early. A short call explaining the asset, the process and the expected timeline usually prevents surprises. Practical tips:

1. Share the valuation and how you'll market the asset.
2. Explain how proceeds will be used in the plan.
3. Confirm the privacy analysis, especially if you sell to consumers.
4. Keep the trustee copied on the motion and the bid summary.

A Subchapter V timeline that works

Because the plan is due in about 90 days, sequencing matters:

That's illustrative. A crowded docket or an objection can push it, and nobody can promise the court's timing.

Pre-filing preparation

If you haven't filed yet, you can do the inventory and the valuation now so the sale can move as soon as the case starts. Be careful about closing a transaction right before filing; see selling data before filing bankruptcy.

Costs

There's no upfront cost for a valuation. Any fee is paid only from a closed transaction and disclosed in the sale papers, with court approval where required. That matters in Subchapter V, where every administrative dollar affects feasibility.

Questions to ask your counsel

• Is a data transaction outside the ordinary course for us? (Almost always yes.)
• Does our lender have a lien on general intangibles?
• What does our privacy policy say about transferring customer information?
• Can the sale be heard on regular notice before the plan deadline?
• How would proceeds show up in the plan projections?

With those answers, you'll know quickly whether a data sale belongs in your plan.

A worked example: a 35-person services firm

A regional IT managed-services company with 35 employees files under Subchapter V after losing its largest contract. It owes $2.1 million, mostly to a bank and two equipment lessors. It has eleven years of help-desk tickets, technician notes and client email in one ticketing system and one email platform.

• Day 1–10: Counsel flags the ticket history as a potential asset in the first meeting with the Subchapter V trustee. The company signs an NDA with a data broker and produces a systems list.
• Day 10–30: De-identification testing on a sample; client names and network details are removed. Three buyers submit indications of interest.
• Day 30–40: The best bid is a $180,000 non-exclusive license, half on the order and half on delivery. The bank agrees that 60% of proceeds will fund plan payments.
• Day 40–65: Motion filed, 21-day notice, no objections, order entered.
• Day 80: The plan is filed with the license proceeds as a funding source, before the 90-day deadline.

The numbers are illustrative, but the pattern holds: in Subchapter V, a data license is most useful when it is identified in the first weeks and approved before the plan is due.

Disposable income and the license proceeds

In a non-consensual Subchapter V plan, the debtor generally commits projected disposable income for three to five years. One-time license proceeds can help fund initial plan payments or a cure of arrears, and the plan should say how they're treated. Discuss with counsel whether to apply proceeds to secured claims, to a pool for unsecured creditors, or to operations, because each choice affects confirmation. How data sale proceeds flow into the estate explains liens and carve-outs, and data assets in a plan of reorganization covers plan drafting.

Frequently asked questions

Can a Subchapter V debtor sell assets during the case?

Yes. Sales outside the ordinary course still need notice and a hearing under § 363(b), with the same privacy limits as any Chapter 11.

What does the Subchapter V trustee think about data sales?

Trustees generally focus on whether the deal helps produce a confirmable plan and is fairly priced. Bringing them in early, with a clear description of the asset, tends to make them an ally.

Is there time to sell data before the plan deadline?

Often yes, if the process starts in the first two or three weeks. The 90-day deadline is the reason to move early.

Is Subchapter V only for very small companies?

It's defined by a debt limit, not headcount. Companies with dozens of employees can qualify if their debts fall under the current limit.

This guide is general information, not legal, tax or financial advice, and reading it does not create an attorney-client relationship. Bankruptcy outcomes depend on the facts, the court and the parties; nothing here promises price, timing or court approval. Talk to your bankruptcy counsel about your case.