In re USA Cricket, 25-16318 (Bankr. D. Colo. Dec. 15, 2025):
Some courts have said that Sub V status can be revoked involuntarily by the court in ‘narrow circumstances.’
If the Code doesn’t authorize the court to “convert” a Subchapter V case to a “regular” chapter 11, what relief can the court give when the debtor is dysfunctional? Is the court limited to dismissing the Subchapter V case, converting to chapter 7 or expanding the powers of the Subchapter V trustee?
That’s a question answered by Bankruptcy Judge Michael E. Romero of Denver in a December 15 opinion.
The corporate debtor had elected to proceed as a small business under Subchapter V of chapter 11. Contending that the debtor was mismanaged and the board of directors was deadlocked, several creditors filed a motion asking Judge Romero to revoke the Subchapter V election and appoint a trustee in “regular” chapter 11.
None of the creditors wanted the case dismissed or converted to chapter 7.
The U.S. Trustee objected to the motion, taking the position that the court had no authority for revoking a Subchapter V election.
‘Narrow Circumstances’ to Revoke a Sub V Election
Judge Romero said he was confronted with “unique circumstances” and addressing “requests [for] equally unusual relief.” On the merits, he began by laying out the governing statutes.
Section 1104 permits the court to appoint a trustee in chapter 11, and Section 1106 allows a chapter 11 trustee to file a plan. However, Section 1181(a) makes neither section applicable in Subchapter V.
Judge Romero therefore said that “the Court cannot appoint a Chapter 11 trustee unless and until the Debtor’s Subchapter V election is revoked.” So, he looked for authority in the Code for revoking the Subchapter V election.
Section 103(i) was of no help, Judge Romero said, because “Subchapter V of Chapter 11 only applies in cases in which the debtor has elected to proceed under it.” Quoting Bankruptcy Rule 1020(a), he said that the debtor’s election meant that “‘[t]he case must proceed in accordance with the debtor’s statement, unless and until the court issues an order finding that the statement is incorrect.’”
“Because a debtor makes its Subchapter V election on its petition, no provision in the Bankruptcy Code provides a mechanism for conversion from a regular Chapter 11 to a Subchapter V and vice versa,” Judge Romero said.
Confronting the same dilemma, Judge Romero said that “few courts have addressed the relief [that the creditor] requests here, that is, whether the Court can use Rule 1009 to compel the Debtor, who is otherwise statutorily eligible to proceed under Subchapter V, to amend its bankruptcy petition to remove the designation so that the Debtor proceeds in a regular Chapter 11 case and a Chapter 11 trustee may be appointed.”
Judge Romero identified one bankruptcy court that “has held that an otherwise eligible Subchapter V debtor’s designation may be revoked under certain circumstances.” The court, he said, “noted that § 105(a) empowered it to revoke the debtor’s election when doing so was necessary to carry out other provisions and goals of the Bankruptcy Code.”
Judge Romero found other courts that “declined to issue a definite opinion one way or the other, but generally agree that there are a few, narrow circumstances that may warrant the revocation of an otherwise eligible Subchapter V debtor’s election.”
Synthesizing the sparse caselaw authority, Judge Romero decided that there “are narrow circumstances in which an otherwise eligible Subchapter V debtor’s election may be revoked.” He then turned “to the question of whether the Debtor’s case fits such circumstances.”
Of most significance, Judge Romero found that the debtor had not shown itself incapable of proposing a confirmable plan, because the deadline had not elapsed. However, he said he “will likely grant any future motion to revoke the Debtor’s designation and appoint a Chapter 11 trustee” if “the Debtor fails to comply with the obligations of Subchapter V, including filing a timely plan.”
Expanding the Sub V Trustee’s Powers
Judge Romero turned to the question of whether dispossessing the debtor in possession under Section 1185 or expanding the powers of the Subchapter V trustee under Section 1183 would respond to the needs of the case. Neither would suffice, he said, because the “Debtor would still retain the sole power to file a plan.”
Judge Romero denied the motion to revoke the Subchapter V election and appoint a chapter 11 trustee without prejudice. Even so, he said that the “Subchapter V Trustee can still aid the Debtor by facilitating the development of a consensual plan without having his powers expanded.”
Opinion of The Bankruptcy Law Firm, PC: Because the Bankruptcy Code does NOT say that a debtor’s SubV Chapter 11 election can be revoked by the Bankruptcy Court, it cannot be revoked by the Bankruptcy Court.